This document discusses local government revenue generation in Uganda. It provides historical context on taxation in Uganda from British rule to present day. It outlines the legal framework for local taxes and fees. The main sources of local revenue are described such as local service tax, property tax, market dues, fees, rents, fines and donations. The rationale for local revenue collection is to fund services and meet development needs. Challenges to revenue generation include low tax base, poor payer attitude and legal/administrative issues. Best practices proposed include accountability, tax payer convenience, and linking taxes to visible service delivery.

1. DECENTRALISATION
STUIDIES
LG REVENUE GENERATION
CPA Kandole Patrick
kandles2009@gmail.com

2. 21 January 2015
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Revenues represents an inflow of
financial resources into Lgs from
communities, Donors and GoU

3. Historic perspectives
 Uganda was create basing on the 1894
 This phenomenon introduced total supremacy of
the British government over Uganda in matters of
“….assessment and collection of taxes ….also the
disposal of the revenues…..”
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4. Historic perspective
 In 1920 the hut tax was reformed into the
Poll Tax, a head tax for every adult male.
 Poll Tax was reformed into a Graduated
Tax, in 1954 for vertical equity.
 The tax was abolished in 2005 due to its
regressive regime. Was the largest
revenue source

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5. Legal framework
 The Local Government (Rating) Act . The
Act provides for levy of rates on property by
local governments within their areas of
jurisdiction.
 TheTrade Licensing Act, This Act regulates
businesses and indicates rates of licenses payable
at each level of governance by business type.
 The Public Health Act, The issuance of
trading licenses is subject to health and safety
regulations and inspections.
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6. Legal framework
 LGST - Guidelines 2009. These require
employers to deduct at source and remit tax
recoveries from employees to the appropriate
LGs.
 The Land Act, in respect to ground rent and
premium.
 LGA schedules
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7. Revenue sources
 Local Revenue
1. Local service tax,
2. Property tax;
3. Market dues; Fees (user, fines, licenses,
permits, parking etc.);
4. Rents; Cess on produce;
5. Fines, penalties, Charges ;
6. Donations, Hotel tax
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8. Concept of revenue generation
 The nature of revenue source depend on
the nature of service to be rendered.
Services may be categorized as pure
public goods, or mixed public goods
 Mixed goods- education, housing,
recreation
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9. Funding community services
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10. Mixed Public goods
 Such services may include education,
where the general public benefits
from services of a child who becomes
a doctor and the individual and family
have an exclusive benefit in terms of
earnings and status.
 Collection of garbage removes diseases
from the community but it also rids your
dwelling of discomforting smells and
unwelcome flies.
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11. Pure public goods
 A situation where the impact of the service
has far and wide externalities, outcomes that
are beyond both the location of consumption
and the real consumer of a service. {cost for
construction of roads, immunization, Malaria
control, construction of infrastructure}.
 On a national scale this represents costs of
national security, fire brigade services, justice,
the Parliament.
 Such services are ideally funded by mass
taxation.
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12. Why LG revenues?
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Purpose:The purpose of
taxation (revenues) is to: ''
mobilise public resources for
management of public goods for
the public good.'‘

13. Rationale for revenue collection
 GoU has a duty and obligation to provide
services to the population using all
available resources at its disposal.
 It is a constitutional duty to pay taxes at
any level
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14. Rationale
 Local governments
have to meet the costs
of social and
infrastructure.
 Changing population
service demands have
created pressure for
more and better quality
services leading to
increased costs and
service gaps.
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15. Rationale
 Revenues can only be adequate if there is a
positive relationship between revenue growth and
the demands made on it and in line with the cost
trend.
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16. Elements in administration
 Enforcement - Following up tax defaulters,
the regular checks on licences, rates to ensure
that all those who should pay actually pay and
they pay the right amount.
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17. Elements in administration
 Collection - Collection of revenue
from the taxpayers, mode and procedures for
payments
 Sensitisation and Publicity-Involves holding
workshops and seminars for the revenue
collectors and the taxpayers and other forms of
awareness campaigns on the importance of
paying taxes say, radio announcements,
advertising, drama. The MoLG is working on a
strategy for mass revenue tax awareness campaigns
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18. Elements in administration
 Collection - Collection of revenue
from the taxpayers, mode and procedures for
payments
 Sensitisation and Publicity-Involves holding
workshops and seminars for the revenue
collectors and the taxpayers and other forms of
awareness campaigns on the importance of
paying taxes say, radio announcements,
advertising, drama. The MoLG is working on a
strategy for mass revenue tax awareness campaigns
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19. Revenue policy implementation
 Rising sufficient revenues however is not the only
task.
 Principles of taxation
 Equity, fairness-Inequity may raises levels of
unwillingness to pay if people feel they are being
asked to pay more than they can reasonably afford.
 Elasticity
 Adequacy of yield
 Political/community acceptance-Revenues must be
raised fairly. The perceived unfairness has often
attracted political intervention.
 Administrative feasibility
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20. 21 January 2015
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Despite the numerous
initiatives at all levels of
governance, Revenue
sufficiency at Lgs still
remains a challenge that
threatens to undermine
gains made by the
decentralization policy!

21. Challenges for LRRs
 Low tax base
 Poor payer attitude
 Poor downward accountability
 Low incomes
 Poor legal framework- trading Act, LST
guidelines, Property rates
 Tax administration challenges and costs
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22. Best practices
 Contracting out
 Tax payer convenience
 Accountability
 Direct banking of revenues
 Fair assessment and collection
 Fair enforcement
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23. Best practices
 Link payment of taxes to levels of service delivery
and show that more revenues will result in better
and more services. Downward accountability and
value for money.
 A clear visibility of services that are appreciated
byTaxpayers may result in increased willingness to
pay more.
 Publication of plans, implementation framework.A
public accountability. Where the money went and
where it came from
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24. Accountability
 Service visibility may
increase willingness to
pay.
 Programme ownership
and participation
 Do transfers increase
public motivation to pay
local taxes
 Most development is
funded by CG Transfers!
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25. Show me the money!
 Under-funded services due to
steep demand on current
finances. Revenues are
insufficient to meet costs of
garbage collection and
disposal, unattended roads,
unmet needs for classroom
space, luck of operation
and maintenance cash.
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26. How can we do better? Governance that
works.
 Ensure tax payer convenience at payment, and
assessment
 Promote fairness in assessment of taxes and
utilization of funds
 Transparent dealings, accountability and
provision of relevantValue for Money services.
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27. Where is the money? Where is the impact of
policy?Where are we now? Is allocation poverty
sensitive?
High poverty levels, poor
redistribution
Better infrastructure, service
delivery?
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28. Revenue enhancement strategy
from Corrective action results
 Improvement in data management
 Improved assessment and cost management
 Improved tax payer relations
 Improvement in control systems.
 New revenue sources
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29. THE END
Local revenue generation
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