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Brief On The Status Of Local Revenues
Local revenues are important for the success and long-term sustainability of infrastructure and service delivery in local governments. In deed the importance of local revenues cannot be over emphasised particularly in the case of Uganda where we have seen local revenues used for councillors' emoluments, co-funding capital development projects, providing bursaries, building administrative headquarters etc.
Article 191 and 192 of the Constitution of the Republic of Uganda specifically empowers local governments to mobilise and generate local revenues. This provision is further elaborated in the fifth schedule of the Local Governments Act, 1997.
In the context of a District Development Plan (DDP), local revenue generation completes the cycle of DDP and the budgeting process by ensuring that local governments are able to finance the projects in the plan.
Despite the importance, the performance of local revenues has generally been poor across most local governments. In addition the absolute amounts of revenues available for service delivery are generally inadequate.
Statistics available in the Commission indicate that districts' local revenues on aggregate stood at 105, 96, 88, 87 and 74 billion shillings in 1997/98, 1998/99, 1999/00, 2000/01 and 2001/02 respectively. The declining trend add to the concerns about the small share of local revenues in total financing to local governments.
There is good documentation and explanation of the causes and the strategies to reverse the poor performance. The outstanding reason for the poor performance is weaknesses in administration procedures. That notwithstanding, a Local Government Development Programme (LGDP) Review of 2002 suggested that the increase in the numbers and sizes of central transfers to local governments could also be contributing to the poor performance. The LGFC is currently reviewing allocation formulas and will consider the introduction of tax-effort in the new formulae in order to reduce the negative impact of central transfers on local revenues.
In addition local governments over depend on graduated tax.
An analysis of local revenue data indicates that district local governments derive up to 50% of their revenues from graduated tax. This ratio was 75% in 1997/98 indicating that the reliance was higher but dropped in 2001/02 mainly because the collection of graduated tax generally declined in 2001/02. The main reason for the decline was the over politicisation of graduated tax during the 2001 elections.
Contribution of the various Local Revenue Types
| Source | Contribution 1997/98 | Contribution 2001/02 |
| Graduated tax | 75% | 51% |
| Property Tax | 2% | 11% |
| User Fees | 6% | 10% |
| Others (including trade licences and tender fees) | 17% | 28% |
In general, the starting point to initiate a turn around in local revenue performance has been the establishment of the Local Revenue Enhancement Co-ordinating Committee (LRECC) which is responsible for promoting the development of conducive policies and encouraging local governments to effectively and efficiently generate local revenues.
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