ISSN 0738-3207 MONOGRAPH No. 13 LOCAL REVENUE AND SERVICE PROVISION IN UPPER VOLTA PHASE I FINAL REPORT LOCAL REVENUE ADMINISTRATION PROJECT METROPOLITAN STUDIES PROGRAM THE MAXWELL SCHOOL OF CITIZENSHIP AND PUBLIC AFFAIRS SYRACUSE UNIVERSITY SYRACUSE, NEW YORK 13210 AUGUST 1983 This project was conducted under a Cooperative Agreement between Syracuse University and USAID, Bureau for Science and Technology, Office of Multi- Sectoral Development, Contract No. AID/DSAN-CA-0198. i FOREWORD This Report on the fiscal structure of Upper Volta provides one of the few systematic examinations of local revenue and expenditure in a developing country characterized by a highly centralized system of government. In such a system, the administration and operation of revenue collection and the delivery of public services to local residents differs greatly from the performance of these functions in nations with decentralized arrangements. Consequently, the specific potentialities for increasing local revenues and for enhanced local participation in service delivery as well as the dynamics of implementation of reforms will vary depending on the nature of governmental structure. The present study enhances our understanding of the workings of one highly centralized fiscal system in a country of extremely limited economic resources. Pressures on public revenues to meet the operational costs of such normal govern­ ment services as education, health, and road maintenance are augmented by the recurrent costs of multi-lateral and bilateral capital development project grants. Since there is only modest prospect for increase in central government taxes in Upper Volta, local sources of revenue constitute one way to meet the revenue shortfall. The feasibility of such an approach and the potential for specific policies hinge on many factors which can be discerned only by close, on-site investigation. This has been undertaken in the present study in one area of Upper Volta and will be further pursued in another region in Phase II of the Project, which is anticipated to commence in November 1983. This Report is based on the work of the entire Upper Volta Project Team. The names of the team members and their responsibilities are presented in the Preface of the Report. The Report itself was written by Prof. Jerry Miner, Upper Volta Project Director, and Mr. Robert Hall, In-Country Team Leader. Roy Bahl Director, LRAP PREFACE This project in Upper Volta is one of a number of country studies conducted by the Local Revenue Administration Project of Syracuse University. LRAP operates under a cooperative agreement between the University and the Bureau for Science and Technology, Office of Multi-Sectoral Development (S&T/MD) of the U.S. Agency for International Development. The specific program of work in Upper Volta, which concerns local resource mobilization and the administration and management of local services, was developed jointly by LRAP, S&T/MD and the USAID Mission in Ouagadougou. Detailed examination of local resource mobilization and service provision was conducted in the Department of the East, where previous USAID projects had accumulated considerable relevant data. Team members spent almost a year in residence there gathering further information. A second phase of this project is planned for an in-depth analysis of another region, the Department of Hauts-Bassins, which contains Bobo-Dioulasso, a city of close to 100,000 inhabitants. The work repurted on here was performed by the Syracuse University team with the cooperation and assistance of the National School of Administration of Upper Volta. The Syracuse team consisted of Prof. Jerry Miner (Economist), Upper Volta Project Director; Robert Hall (Rural Sociologist), In-Country Team Leader; Nilgun Gokgur (Fiscal Analyst); and David Spetka (Public Administration Analyst). Prof. Miner provided overall guidance and technical advice on government finances; Mr. Hall and Mr. Spetka conducted the field work in the Department of iii the East; 1s. Gokgur was responsible for the analysis of public finance and fiscal administration from the central government perspective. Prof. Marshall Segall (Social Psychologist) provided assistance on several aspects of the field work. James Wozny, graduate assistant in economics at Syracuse University, prepared the statistical tables in the Report with great care. The National School of Administration assigned, as a counterpart Research Associate to the project, Mr. Celestine Dabire, whose participat.on was Invaluable. Mr. Dabire wrote three background papers from which much information was incorporated into this report, his knowledge of the workings of Upper Volta's fiscal system was of great help to the work of the Syracuse team, and his participation in interviews and meetings provided us with an insider's insights and interpretations. Further, the School provided offices for project staff, typing assistance, and documentation services. In addition the Director of the School assisted in arranging interviews and meetings with gcvernment officials. Officials of central government ministries were generous in providing information. The field work would not have been possible without the cooperation and assistance of officials of the Department of the East and the Commune of Fada N'Gourma, and the chiefs of Piela, Bogande, and Bilanga. The Ouagadougou USAID rission provided the support so essential for this undertaking. The general support services of the mission kept the team functioning throughout its period in Upper Volta. Dr. James T. Smith, Jr., mission economist and project liaison, was involved in the iv project from its initial conception. Without his advice and counsel on substance and procedures the project would not have succeeded. The essence of a cooperative agreement between a university and a government agency is cooperation. The continuing and effective assistance of Dr. Robert Firestine, Project Monitor of S&T/MD during the major portion of the Upper Volta project, made an enormous contribution to facilitating the difficult task of reconciling the different operating styles of government and university. Finally, we wish to thank Mr. William Saulters, USAID Upper Volta desk officer whose knowledge of how to get things done resolved many critical procedural matters. Jerry Miner Project Director REPUBLIC OF UPPER VOLTA SAHEL I ! I 2 YATENGA "" Dori 0 , NORTH "n . _._ ""DoOuahigouya tResearchZone ."'.40 Kaya - Niger Mali BLACK VOLTA -" >-,.., ,, /% I EAST Dedougoue KoupelI " l-- : . ' Oluagadougouk %.-.,­ .. -'---']" x -;" EN~A, -" 0 Fada N'Gourma ¢ _jC v I,, -%%_/ EA ST %. _ -- ..... "'.% CENTRAL, BOBOBDIOULASO WEST Bobo-Dioulasso yI CENTRAL , N I •",.- 9f Benin Diebou"ou Research Zone IBanfr hana Detailed Study COME , -BOUGOURIBA Ivory Coast) vi UPPER VOLTA ECONOMIC AND SOCIAL INDICATORS Population (mid-1980): 6.1 million Population Density: 22 inhabs/sq km Area: 274,000 sq km Per Capita GNP (1980): $210 Average Annual Growth Rate of GNP (1960-1980): .1% Average Annual Rate of Inflation (1970-1980): 10.1% Average Index of Food Production (1969-71=100) (1978-80): 95 Sectoral Shares of GDP 1960 1980 Agriculture 62 40 Industry 14 18 Services 24 42 Sectoral Shares of the Labor Force 1960 1980 Agriculture 92 82 Industry 5 13 Services 3 5 Life Expectancy 1960 1980 Infant Mortality Rate 1960 1980 (years) 36 39 (deaths per thousand) 252 211 Percent of Population with Access to Safe Water (1975): 25 Per Capita Calorie Supply as a Percent of Requirement (1977): 93 Population per Physician (1977): 50,000 Adult Literacy Rate (1977): 5 percent National Budget (CFAF billions) 1976 1981 Foreign Aid (1980) : CFAF 35-40 bill Revenues 22.1 48.8 (actual disbursemen.s) (estimated) Expenditures 21.0 46.t Merchandise Trade (1980): Exports $45 million Exchange Rate Imports $330 million (CFAF per $ ITS) Major Exports (1978): Cattle, Groundnuts, Oilseeds 1977 245.7 Major Imports (1978): Textiles, Foodstuffs 1978 225.6 Terms of Trade (1975=100) 1960 1980 1979 212.7 88 899 Current Account Balanice of Trade 1970 1979 1980 211.3 ($ millions) 9 -68 1981 271.7 External Public Debt as a % of GNP 1970 1980 6.3 24.4 vii TABLE OF CONTENTS Page No. PREFACE ii LIST OF TABLES AND FIGURES x SUMMARY OF FINDINGS xiii EXECUTIVE SUMMARY E-1 CENTRAL AND LOCAL REVENUE IN UPPER VOLTA 1 Introduction 1 An Overview of African Tax Systems 2 Revenues of the Central Government 5 Indirect Taxes: Import, Turnover and Excise Taxes 9 Indirect Taxes: Export Taxes 16 Direct Taxation 16 Provisions; of Specific Direct Taxes 18 Summary 28 Revenues of Local Authorities 29 Organization of Territorial Administration 30 Departmental and Communal Taxation 36 An Overview 36 Departmental and Communal Revenue Sources 38 Provisions of Specific Taxes Providing Department and Communal Revenues 41 Regional Differences and Local Revenues 47 PUBLIC EXPENDITURES, PUBLIC SERVICES AND SERVICE ADMINISTRATION IN UPPER VOLTA 52 Introduction 52 An Overview of Public Spending 53 Estimates of Aggregate Non-Private Spending 54 Comprehensive Data on Non-Private Spending 55 Public Consumption 61 Foreign Aid 61 Subsidies and Transfers 62 Parastatal Organizations 62 Summary 63 The Composition of Public Spending 64 National Budget 64 Composition of Departmental and Communal Budgets 69 Functionel Distribution of National Budget Outlays in Regions 76 Overview 76 Methods for Departmental Distribution 79 Distribution of Foreign Aid for Local Services 83 viii TABLE OF CONTENTS (CONT.) Page No. Distribution of ORD Expenditures 88 Total Local Service