Corruption and local government revenues 25 March 2019

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Drivers of corruption can undermine all parts of local government revenue systems when the respective systems are not robust. This presentation, given to the OECD’s “Improve public citizen service interface at the local level” conference on 25 March 2019 (undertaken as part of the OECD’s Good Governance and Anti-corruption in Tunisia project) https://oe.cd/hawkama4tunisia, outlines various aspects of local government revenue systems and offers strategies for combatting associated corruption.

Government & Nonprofit

Corruption and local
government revenues
Addressing revenue corruption
requires a range of measures
John W. Leonardo Principal PFMConnect

The local government revenue system
• Property records showing details for every
property
• Property valuation (and revaluations)
• Community consultation and disclosure by local
governments
• Service usage data (in the case of user charges)
• Billing
• Collection
• Enforcement
• Internal and external audit
John W. Leonardo Principal PFMConnect

Revenue system corruption drivers
• Adverse influences from local government
politicians
• Limited use of automated systems
• Limited transparency
• Inadequate staff practices, rules and supervision
• Weak internal controls associated with weak
public financial management systems can
undermine billing, collection and enforcement
• Inadequate security features in IT systems
John W. Leonardo Principal PFMConnect

Corruption impacts on revenue
generation
• Significant correlation between corruption and
poor public financial management among some
countries
• Revenue system corruption drivers create
negative impacts on revenue flows
• Corruption has a negative influence on public
perceptions resulting in lower taxpayer revenue
compliance
• Where national corruption levels are high,
corruption is likely to permeate many local
government activities
John W. Leonardo Principal PFMConnect

Combatting revenue corruption:
property registration and valuation
• Digital recording of property registration and
valuation information
• Third party approval of property valuations:
the Australian and New Zealand practice of
legislated “Valuer-General” positions to
approve local government valuations
John W. Leonardo Principal PFMConnect

Combatting revenue corruption:
billing
• Taxpayer obligations are made transparent:
websites and social media engagement,
newspapers, radio, television
• Information about revenue topics is provided
with property tax bills: how funds are used
including the link between revenue flows and
service delivery, likely enforcement measures
in event of non-payment
John W. Leonardo Principal PFMConnect

Combatting revenue corruption:
collection
• General objective: promote voluntary
compliance
• Significant advertising of taxpayers’ payment
obligations
• Providing a range of payment options: banks,
post offices, internet, local government offices
John W. Leonardo Principal PFMConnect

Combatting revenue corruption:
enforcement
• Sanctions and penalties for non-payment are
applied consistently
John W. Leonardo Principal PFMConnect

Combatting revenue corruption: audit
• Effective internal and external audit capability
required to support actions to combat
revenue corruption:
– Minimise computer hacking
John W. Leonardo Principal PFMConnect

Combatting revenue non-compliance
• Addressing revenue corruption drivers
• Ensuring effective local governments and
adequate delivery of services will increase
community confidence in local governments and
facilitate greater compliance. Some actions:
– Demonstrating fairness in revenue policies
– Demonstrating good financial management
– Reporting on local government budgets and
performance
John W. Leonardo Principal PFMConnect

Combatting revenue corruption:
supporting anti-corruption policies
• Local governments should maintain effective
anti-corruption policies and strategies:
– Codes of Conduct for officials and politicians
including asset declarations
– Effective staff policies including appropriate
disciplinary measures
John W. Leonardo Principal PFMConnect

Combatting revenue corruption:
external actors’ roles
• Development partners can provide
– Technical assistance to local governments and civil
society
– Capital funding for IT equipment and systems
• Civil society:
– Must first have the capacity to make a contribution
• Media:
– Provide informed analyses of local government
activities
John W. Leonardo Principal PFMConnect

Way forward
• Encourage local governments to introduce
reform measures that have an anti-corruption
aspect prior to the launching of any related
legislative obligations
• Political will at national and local government
level is an essential pre-requisite
• External stakeholder support is important
• Supportive legislative framework required
John W. Leonardo Principal PFMConnect

Thank you
• Supporting material available on PFMConnect
websites:
– https://www.pfmconnect.com
– http://blog-pfmconnect.com
John W. Leonardo Principal PFMConnect

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