Limited funds affect service delivery in local governments

Wednesday March 30 2016
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The Commissioner General URA, Ms Doris Akol (R), after visiting a compliant taxpayer at LOCD shop on Duka Road in Arua town recently. PHOTO BY FELIX WAROM OKELLO

Kampala. Different district local governments have been registering a deficit in tax collections for the past three years.
The collected monies are way below the projection of each district; while in others, much of the money collected is embezzled creating a shortfall in the amount of income generated within the districts.
Mpigi District chairperson John Mary Luwakanya, in an interview with Daily Monitor recently, said Mpigi is an example of the many districts in the country which do not only experience shortage of funds from the central government but also collect less money from local revenue compared to the district budgetary projection.

“We usually project an amount of money we expect to get in each budget reading at the beginning of each financial year but only to get a short fall of about 48 per cent,” Luwakanya said.
“Sometimes, you would wish to use the money provided by government in the most pressing activities we face as districts but they are conditional grants that come with orders which bar us,” said Mr Abdul Kyabangi, the Gomba District chairperson.
According to the 2015 Auditor General’s report released recently, many local governments face similar challenges. Masaka Municipality, for example, lost up to Shs290 million that was collected as local revenue but stolen before it reached the accounting authority.

The report says Masaka Municipality loses close to Shs300 million in local revenue every financial year to fraudulent collections due to lack of an assets register. This loss, it was revealed, has stalled implementation of the municipality’s five-year development plan.
According to the report 2013/2014, the municipality expected to collect local revenue amounting to Shs1.02b. However, it realised Shs734 million only, registering a shortfall of more than Shs290 million.
According to Mr Joseph Kimbowa, the Masaka town clerk, also notes poor revenue collection stems from lack of an assets register.

He also blamed tax collectors in the municipality for drawing their own receipts that are usually given to the payees and money is taken for personal benefit.
In other municipalities including Gulu, Kasese and Mbale, locally generated revenue, has for the last three years, been decreasing due to poor methods of collecting local service tax.
Local governments usually get funds from locally generated revenue collected from taxes within the districts, government conditional and non-conditional grants from external donors.
In the 2015/2016 Budget, government offered Shs2.2 trillion for the Local Government ministry, which, according to different civil society groups, was considered low compared to the number of districts and work done by local governments.

Mr Ashaba Aheebwa, an officer at the Local Government Finance Commission, indicated that local governments are on the verge of failing duties since they have failed to generate locally raised revenue to add onto the money received from the central government.
“There should be a review on how money is collected because local governments are on the verge of failing in sustainability. They cannot collect enough local revenue to help them move on,” Mr Aheebwa said.

How local revenue is distributed
According to the financial regulations in the Local Government Act Cap 243, all the money collected as local revenue is kept in the district treasury. About 35 per cent of it is remitted back to the sub-county to work on planned activities. However, 25 per cent of the money that is remitted to the sub county level is usually remitted to the village level.
Many village and sub-county chairpersons have complained of not receiving the money from the sub-counties, a factor that has led to inefficiency service delivery at the village and parish levels.

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The level of participation by community members in the taxation process, according to Mr John Okodel, an officer on the National Local Revenue Enhancement Committee, is still a challenge since many do not know what taxes are used for.
“There is a need to stimulate the practice for effective information exchange and sensitisation for the people to know their obligation towards tax and this can be carried out through organising trainings that provide updated guidelines on how tax is collected and utilised,” Mr Okodel said.
Unfriendly force in tax collection is still a challenge, according to Okodel. Ambushing tax payers without clear knowledge of when and why one should pay taxes, for example, needs to change.

Mr Edward Maalo, a consultant under Community Driven Change, in an interview with journalists recently indicated that there is also lack of transparency by many tax collectors around the country who do not report the actual amount of taxes that they collect from different localities.
“This is manifested in how the taxes are allocated; there is no mode of resource allocation. The masses are not convinced on why they should continue to pay taxes because they don’t effectively benefit from the revenue that is collected from them,” he said.

Mr Maalo also indicated that there is a problem of conflict of interest where the political leaders who at the same time are business owners, do not want to pay taxes for their businesses and in most cases, they also don’t want to tax their voters.
“In order to reduce the burden of the payers paying taxes that are used comprehensively annually, timely reporting should be presented monthly, directly to the heads of local governments and the amount that is collected,” Mr Maalo indicated.

Possible ways to improve
To improve local revenue collection, Mr Okodel indicated that as District officials under the local revenue collection scheme account to the central government, even the local people where local revenue is collected need accountability of how money collected from them is used.
“As we empower people to pay taxes in form of local revenue, tax payers want to know where their money goes and how it is handled. That alone will stimulate people to pay more taxes because they will know where their money goes,” Okodel said.
Mr Raphael Magyezi, the former general secretary of the Uganda Local Government Association in a telephone interview with Daily Monitor indicated that government needs to develop more mechanisms that could help district local governments to account for local revenue.

About tax
Tax is a fee legally instituted by a government that someone is meant to pay. This can be in many forms, for example, land fee, hotel tax and trading licences, among others.

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