REVENUE COLLECTION AND LOCAL GOVERNMENT SERVICE DELIVERY IN

UGANDA. A CASE OF MBARARA LOCAL GOVERNMENT

BY

AKANKUNDA LILIAN

1163-060404-08512

A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF HUMANITIES AND

SOCIAL SCIENCES IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

THE A WARD OF BACHELOR’S DEGREE IN PUBLIC ADMINISTRATION OF

KAMPALA INTERNATIONAL UNIVERSITY

AUGUST 2019

DEC ARATION

I, Akankunda Lilian with the registration number 1163-060404-08512 declare that this research

dissertation on “Revenue Collection and Local Government Service Delivery in Uganda.

A case of Mbarara Local Government” is original and has not been presented partially or in

total to any institution for publication, academic award or other use.

Signed: ... Ati~~ Date~ ~

APPROVAL

This is to accept that this research dissertation has been under my supe~ision as a university

supervisor and is flow ready to be submitted for examination.

DR MUZAARE GERALD

Signature:~. ~

111

DEDICATION

Firstly, I would like to dedicate this piece of work to the Almighty God who has enabled me to

carry out research successfully and my beloved Mother and my siblings for their support. May

the Almighty God bless you all.

iv

ACKNOWLEDGEMENTS

Firstly, am greatly indebted to my supervisor who tirelessly perused through this report to guide

and correct me. I appreciate your effort. I cannot fail to acknowledge my lecturers in the college

of Humanities and social sciences for the knowledge that they passed on to me, without you

this would not be an easy task.

I would like to convey my sincere thanks to the management of Mbarara Local Government

and their clients who participated that helped in filling the questionnaires. Thank you so much,

your contribution enabled me to write this research paper.

Lastly, thanks go to my dear Mother and my siblings once again and the entire family for their

tremendous support and encouragement.

May Almighty God Bless you all.

V

Table of ContentsDECLARATIONAPPROVALDEDICATION ivACKNOWLEDGEMENTS

CHAPTER ONE I

INTRODUCTION

1.1 Background of the Study

1.1 .1 Historical Perspective 1.1.1 .2 Theoretical Perspective 31.1.3 Conceptual Perspective 31.1.4 Contextual Perspective 41.2 Statement of the Problem 5

1.3 Purpose of the Study 5

1.4 Objectives of the study 6

1.5 Research questions 6

1.6 Scope of the study 6

1.6.1 Geographical Scope 6

1.6.2 Content scope 6

1.6.3 Time Scope 7

1.7 Significance of the study 7

CHAPTER TWO 8

LITERATURE REVIEW 8

2.0 Introduction 8

2.1 Theoretical Review 82.2 Conceptual Framework showing Independent and Dependent Variables 102.3 Empirical Review 102.3.1 Methods of Revenue Collection ii

2,3.2 How has the contributions of revenue collected helped in service deliveiy in Iocall3

2.3.3 The challenges faced in revenue collection 15

2.4 Solutions to the challenges faced in revenue collection 18

2.5 Conclusion 21

2.6 Gaps in the Literature 21

vi

CHAPTER THREE .22

RESEARCH METHODOLOGy

3.0 Introduction 22

3.1 Research Desian 22

3.2 Population of the Study 223.3 Sample size: 233.4.1 Sampling design 233.4.2 Sampling procedure 233.5 Data Collection Instruments 233.5.1. Questionnaire 233.5.2 interviews 243.6 Sources of data 243.6.1 Primaiy data 243.6.2 Secondaiy data 243.7 Data Analysis 243.8 Ethical Consideration 24

CHAPTERDATA PRESENTATION, ANALYSIS AND INTERPRETAT1ON,~~,~4.0 Introduction 264.1 Socio~dernographic data 264.1.1 Age of the Respondents 274.1.2 Education Level of the Respondents 274.1 .3 When the respondents joined 284.1.4 Occupation of the respondent 284.2.0 Methods of local revenue collection 29

4.2.1 Methods of local revenue collection in Mbarara Local Government 29

4.3 Contributions of local revenue towards service delivery in Mbarara 30

4.5 Challenges faced in revenue collection in Mbarara Local Govermnent 32

4.6 Measures to overcome challenges faced in revenue collection in Mbarara 34

CHAPTER FIVE ~36DISCUSSION OF FINID1NGS, CONCLUSION AND RECOMMENDATION5~ 365.0 Introduction 365.1 Summary of the findings’ 365.1 Discussion of the study finding 365.1.1 To establish the methods of revenue collection in Mbarara local government 365.1.2 To find out how revenue collected has helped in service delivery 365.1.3 To find out the challenges faced in revenue collection in Mbarara local 36

5.2 Conclusions 37

vii

5.3 Recommendations 375.3 Suggested areas for further research 39REFERENCES 40APPENDIX I: QUESTIONNAIRE FOR ADMINISTRATORS 43APPENDIX II: QUESTIONNAIRES FOR THE COMMUNITY 44APPENDIX III 48INTERVIEW GUIDE 48Appendix IV: The Krejcie and Morgan table for detennining sample size 49

viii

ABSTRACT

This research was ~rned at the role of local revenue collection and service delivery in lower local

government in Mbarara local government~ Mbarara District local government. The study was

based on three m~n objectives which were:~ to find out the methods of revenue colledhon in

~arara local government, to find out how revenue collected has helped in service delivery in

local governments and to find out the challenges faced in revenue collection in ~arara local

government. The researcher obtained a letter of introduction from Kampala International

University research unit, which was presented to the officer in charge of Mbarara local

government. Local Government where the researcher’s case study was based. The researcher used

both qualitative and quantitative research designs with a sample of 92 respondents who included

the staff of Mbarara local government. Local government. Qualitadve data was obtained through

questionnaires, interviews and observation while quantitative data was obtained through

computation and analysis.

The research findings showed the challenges faced by the District Local Government such as;

political inte~erence, tax evasion and tax avoidance, how revenue collection could be improved

and how local revenue had a strong impact on service delivery in local governments. The

researcher concluded that local governments have challenges in revenue collection but such

challenges were not beyond control. Basing on the findings the researcher concluded that revenue

collection has a ~eat impact on service deliveDl. This could be evidenced with poor service

delivery with a decline local revenue collection and improved service delive~ ~th a ~se in

revenue collection. However the researchers recommended measures to improve on revenue

collection like training tax collectors, sensitizing the masses. The researcher suggested that future

studies should be conducted to analyze any other factors that affect revenue collection as well as

service deliveiy in local governments.

ix

CHAPTER ONE

INTRODUCTION

LI Background of the Study

The back~ound of the study is presented in the following perspectives; i.e historical, theoretical

conceptual and contextual.

Lid Historical Perspective

in 1992, Uganda adopted the decentralization policy that sought to establish a system of

governance underpinned by strong local governments. Subsequent constitutional and legal reforms

established districts and the sub~counties as key pillars of local governments through which

effective service delivery and local governance is to be attained. Although decentralization has

been pursued over the last two decades, there is widespread consensus that the peiformance of

local governments is less than desirable. Decentralization in Uganda started in 1993/94 with the

main objective of building a more democratic government that is responsible and accountable to

the public to promote capacity building at the local level and introduce local choice into serrice

delivery fostering a sense of local ownership, (langseth, 1996). According to Local Government

Act 1997, defines revenue collection as the sub total of all categories collected from a number of

sources like market dues, fines and penalties, parking fees. in conformity with the local

government, (resistance councils) statue NO.15 of section 44 of 1993, the 1995 constitution of the

republic of Uganda provided a decentralization system of governance with the districts at the top

of the administrative units. They are governed by the Constitution of 1995 of the republic of

Uganda and local government Act of 1997.

According to schedule 2 of the Local Government Act 1997 gives mandate to local govermnents

to collect revenue collections from their own sources such as property tax, licenses, permits, fines

and penalties, market dues, parking fees, and take financial decisions while complying with

financial and accounting regulations 1998 guide of the financial operations and specifies

decentralization policies, rules and regulations. Local governments were empowered to cam~y out

proper planning decisions at budget level, do complete enumeration and assessment of taxes for

financial decentralization to succeed in improving revenue collection (Iversen, 2004).

I

A~icle 176 (2) of the constffiifion of the republic of Uganda 1995, schedule 2 of the local

government Act (1997) and sections 97 and 98 of local governments were to offer services

including and not limited to education, medical and health se~dces, spo~ing facilihes while using

their revenue collechon forces which Ms. Cotilda ~abazi secretary for Finance on June

2009 said that they contribute 0.9% funding their budget (New Vision Jrine 12,2009). The revenue

base of local governments has diminished and they are now heavily dependent on central

government disbursements mainly through conditional grants. The quali~r of services is less than

desirable as key se~ices such as health care, water and sanitation, education and agricultural

advisory ser~4ces remain dismal. Yet, there is no e~dence that the citizens who are the intended

beneficiaries of the decentralization system are able to demand for accountability and better

performance from their elected leaders. There has been a gro~h in the number and diversity of

revenue transfer mechanisms from central government and donors, which has been a matter of

growing concern in both cenfral and local governments. Many of these mechanisms are not well

adapted to the decenfralized framework, resulting in local governments given little power over the

allocation of resources and liftle involvement of lower local governments in decision~making

(Mutenyo, 2000).

The Local government Finance Commission has focused on three areas of improvement in order

to enhance revenue collections. These are; improving co~orthnation amongst cenfral institutions;

facilitating policy debate to inform the Local Government Finance Commission and ~nistry of

Local Government on policy and legal improvements; and enhancing the capacities of local

governmnents to raise more revenue collections by encouraging them to imnplement best practices.

To facilitate the implementation of these revenue enhancemnent objectives, the Local Government

Finance Conunission established a Revenue collection Enhancement coordinating Committee

(L~CC) in April 2002. The main tasks of the L~CC are to co~ordinate and suppom~ the

development of conducive decisions and policies regarding revenue collection and to enhance the

capacities of local governments to effectively and efficiently generate and manage sustainable

revenue collections (George, 1998).

1.1.2 Theoretical Perspective

The study was guided by the benefit Theory of taxation developed by Erik Robert Lindahi in 1960.

According to Benefit Theory, the state should levy levies on individuals according to the benefit

given to them. The more benefits a person obtains from the accomplishments of the state, the more

the duty the person should reimburse to the government. This principle has been condemned

because, first, if the state keeps a certain linking between the benefits given and the benefits

received, it will be in contradiction of the basic principle of the tax. A tax is principally a obligatory

contribution done to the public authorities to meet the expenditures of the government and the

supplies of general benefit to all citizens (Booker, 2004).

1.1.3 Conceptual Perspective

Revenue refers to the total amount of money received by a company from goods and services sold

(Parkin 1995). According to Patton (1993), Public revenue means those amounts the Local

Government (LG) receives from different sources (donations, government grants and local

revenues e.g. licenses, market dues and other miscellaneous revenues). In other words, the income

of the local government is public revenue. The major sources of local revenue include; parking

fees, market dues, land fees, trading licenses, inspection and plan fees, registration fees, water

revenue, taxes on specific services, local service tax (LST) , local hotel tax(LHT),operationai

permits and marty others (Mutenyo, 2000).

Helmsing (1995) in his study defines service delivery as a deliberate obligatory decision by the

elected or appointed officials to serve or deliver goods and services to the recipients. Heskett

(1987) defines service delivery as an attitudinal or dispositional sense, refelTing to the

internationalization of even service values and norms (Burke, 1964).

According to National Service Delivery Survey (2008), the government has the obligation to

provide services to its citizens and to steer economic growth and development through the

provision of public services. The public service is the main implementing machinery for national

development programmes and specifically, the delivery of public services. It is therefore very

important for the public service to monitor and evaluate the delivery of public services and to

obtain feedback from service recipients, regarding their efficiency and effectiveness. The National

3

Ser~ce Delivery Su~ey (NSDS) has been institutionalized by Government as a key instrnment to

that effect. Under the Public Service Reform Programme, su1~eys are conducted in the sectors of

education, health, road infrastructure, water and sanitation, agriculture and governance among

others.

However, in this study, service delivery was concep~ialized as (health, education, water) and

revenue collection is local revenue, transferred from the central government the local government.

Li.4 Contextual Perspective

Revenue collection helps to achieve service delivery in the ~arara Local government by co~

funding development projects for example the child and early nufrition project in the health sector.

Mbarara Local government development programmes and plan for modernization of a~cuI~ire

grants for both higher and lower local government though sometimes revenue collections are used

to fund stand~alone projects for the local population. Service delivery is defined as the process of

extending basic services like education, health care, water, transport and communication where

the end users are the public or the local people within the coun~’. In other words, the locals are

the beneficiaries (Bungling, 1997) ~arara Local government local government budget is said to

dominated by health, education, and road sector according to the secretaty of finance Ms Cotilda

~abazi on June 12 2009, she said that 95%funding were expected fonn goveniment transfers,

4.1% from donors and NGOs co~sponsorshi.p while only 0.9% was expected from revenue

collection because tax collectors face external political interventions to make them deviate from

the laid down revenue collection procedures and regulations leading to tax evasion and tax

avoidance hence poor revenue collection (Burke, 1964). Despite rapid urban growth, most of sub~

Saharan Africa’s population continues to live in rural areas. For that reason alone, local

government in rural Africa — and its capacity to deliver public goods and services merits both

inves~nent and interest. Moreover, it is in the rural areas of ~ica that the poorest live and where

the greatest challenges for poverty reduction exist — focusing on poverty reduction in Africa almost

invariably implies the need to pay special attention to the rural dimensions of poverty. If local

government in nmral Africa is to be relevant, accountable and thus deliver appropriate se~ces,

then, it must also face up to the challenges of poverty reduction (Walt, 2000).

4

It is evident that the single most important source of revenue for local governments in Uganda is

transfer from central governments. While a high proportion of central transfers by itself do not

injure the autonomy of the local government, the conditions frequently attached to these transfers

undermine genuine local decision making. The majority of these transfers are conditional. (Ahmad,

2006). This, coupled with the low revenue base, threatens the autonomous functioning of local

governments. Find that the level of debt financing in local governments’ budgets is very low. This

is due to the stringent cap imposed on them by the law which forbids local governments borrowing

from exceeding 25% of locally generated revenue. This has contained the indebtedness of local

authorities, but at the same time it has eliminated the ability of local governments to access

additional resources to finance service delivery that is based on local needs (Byarugaba, 1995).

L2 Statement of the Problem

Local revenue collected enables local governments to implement their planned budgets and work

plans. They use this revenue for co~funding on capital projects, monitoring of all the programs and

the general supervision of constructing latrines, classrooms and health centre’s and opening of

community roads to ensure better standards so as to meet the desired services (Manor, 1998). But

despite of all that, The level of service delivery in Mbarara District local government remains

poor as evidenced by high maternal deaths, high poverty levels ,the poor hygiene of the

communities ,poor sewerage system, dumping sites, water source, and street lights that all turned

out to be nonexistent or below standards (Ahmad, 2006). However, the situation has not improved

this may be because of the low level of revenue collected. This could lead to poor health services

to the citizens, insecurity, poor educational services among others (Manor, 1998). Revenue

collected from sources such as trading licenses, market dues, fines, and fees were also declining

tremendously to be effectively utilized to provide the required services to the public. This can be

evidenced from the various deficit financial budgets of the District for the past three years, which

means that the estimated expenditures are more than estimated incomes hence a hindrance to

effective sewice delivery. It is upon such a state affair that the researcher investigated the nature

of revenue collection on service delivery in Mbarara District Local Government.

L3 Purpose of the Study

The main purpose was to examine the role of revenue collection and local government service

delivery in Uganda in Mbarara Local government.

5

IA Objectives of the study

i. To examine the methods of revenue collection in Mbarara Local government.

ii. To establish how revenue collected has helped in service delivery in local governments

iii. To identify the challenges faced in revenue collection in Mbarara Local government.

L5 Research questions

i. What are the methods of revenue collection in Mbarara Local government?

ii. How revenue collected has helped in service delivery in local governments

iii. What are the challenges faced in revenue collection in Mbarara Local government?

L6 Scope of the study

L6J Geographical Scope

The research was carried in Mbarara Local government Western Uganda. Mbarara District is

bordered by Ibanda District to the north, yiruhura District to the east, Isingiro District to the

southeast, Ntungarno District to the southwest, Sheema District to the west and Buhweju District

to the northwest. The district headquarters at Mbarara, the largest city in the sub~region, are located

approximately 290 kilometres (180 mi), by road, southwest of Kampala, Ugandats capital city, and

largest metropolitan area. The coordinates of the district are:00 36S, 30 36E. Tn 1991, the national

census put the population of the district at about 267,500. The 2002 national census estimated the

district population at about 361,500, with an estimated growth rate of about 2.2%. Of these, 51%

were female and 49% were male. 55% of the district population are aged between 0 and 18 years.

In 2012, the district population was estimated at approximately 445,600. As is the case with the

majority of Ugandan districts, agriculture is the mainstay of the economy of Mbarara District. Both

crops and livestock are raised in the district, primarily on a subsistence level, but several

commercial fanns are located in the district.

L6.2 Content scope

The study covered revenue collection and service delivery in Mbarara Local government;

specifically the study concentrates on the methods of revenue collection in Mbarara Local

govermnent, how revenue collected help in service delivery in local governments, and to find out

6

the challenges faced in revenue collection in Mbarara Local government and to document possible

solutions to the challenges faced in revenue collection in Mbarara Local government.

L6,3 Time Scope

The research covered data from period between 2012 to 2018 to get secondary sources of

info~adon. This enabled the researcher to get detailed infonnation and cover a wide range of

period leading to a good report.

L7 Significance of the study

The study will help the researcher and other academicians who would have the interest in

searching into a related field by enabling them get related literature.

The study also will help the government in lrnowing the problems and challenges faced in revenue

collection and service delivery.

The study will help to establish the causes of fluctuations in the revenue collection in Mbarara

Local government.

The study whl be beneficial to policy makers of ~arara Loc~ government and other Local

Govermnent in finding a solution to the problems of fluctuations in the revenue collections and

appraises their performance.

The research will be beneficial to other academicians as they might use it for literature review

while carrying out research in the similar area.

The study will be used to other stakeholders for example Donors and the Central government to

analyze linkages between revenue collection administration and performance.

7

CHAPTER TWO

LITERATURE R.EV1EW2~O Introduction

This chapter covers a ~itten discussion of related literature search. it is as per the study and

reflects the objectives of the research with regards to the role of revenue collection on service

delivery in Mbarara Local government. While reviewing the related literature, the research mainly

focused on the important study variables which are: revenue collection and service delivery.

2.1 Theoretical Review

The research adopted three major theories to guide the study; Vroom ‘s Expectancy Theory,

Benefit Theory of taxation, and technology acceptance theory.

2~Li Vrooms Expectancy Theory

The Vrooms Expectancy Theory was proposed by Victor Vroom in 1964. The model states that

the stren~h of a tendency to perform in a particular method is dependent on the strength of

anticipation. The Expectancy theory states that employee’s motivation is an outcome of how much

an individual wants a reward, the valuation that the likelihood that the effort leads to projected

performance and the belief that the performance leads to remuneration, Valence is the significance

associated by a specific about the expected consequence (George, 1998). It is an expectation and

not the actual gratification that an employee anticipates to receive after reaching the goals.

Expectancy is the confidence that better efforts were affected in better performance. Expectancy

is predisposed by factors such as ownership of suitable skills for execution of jobs, accessibility

of right resources, accessibility of vital information and getting the required backing for carrying

out the job ~Burke, 1964). Vroom was of the opinion that employees deliberately decide whether

to perform or not at the job. Vroom recognized that an employee’s performance is based on

individual issues such as persona, skills, lumwledge, practice and abilities (Burke, 1964).

The theory stated that effort, performance and inspiration are connected to a person’s enthusiasm.

This is exaggerated by such things as having funds available, having the right aids to do the job

and having the required support to get the job done. Waema and Bawman (2005) further points

out that instrumentality is the belief that if you perform well that a valued outcome will be received.

This is pretentious by such things as clear understanding of the correlation between performance

and outcomes.

8

2~L2 The Benefit Theory of taxation

This theoiy was developed by fink Robert Lindahi in 1960. According to Benefit Theoiy, the state

should le~ levies on indi~duals accor~ng to the benefit given to them. The more benefits a

person obtains from the accomplishments of the state, the more the duty the person should

reimburse to the government. This principle has been condemned because, first, if the state keeps

a certain linking between the benefits given and the benefits received, it will be in contradiction of

the basic principle of the tax. A tax is principally a obligatory contribution done to the public

authorities to meet the expenditures of the government and the supplies of general benefit to all

citizens (Booker, 2004).

Furthenu ore, most of the expenses suffered by the state is for the overall benefit of its citizens, it

is not likely to estimate the benefit received by a particular individual every year for it to be obvious

how much duty this indi~dual should be charged. According to this model there should be some

advantage to those who pay taxes. The free~rider problem is the pbma~ disapproval given for

limiting the scope of the subsidy principle. Each indi~dual can lower his tax cost by under

reporting his aids derived from the public good or service (Brautigam, 2004). It assumes that taxes

should be paid by an individual in proportion to benefits conferred by the State on that individual,

is quite unrealistic because the benefits derived cannot be correctly measured in tenns of money.

Benefit is purely a subjective matter and there is no scientific way to measure the magnitude of

benefit and its money value.

9

~eCollecfion• Trading licensee Market Share ideas

• Land fees/ground rente Parking fees

Th~• Government policy• Decision making• Operational Reforms

Regulatory Frameworks

Source: (A.dopted from Boadway, Robin & Roberts, Snadra & Shah, Anwar, 1994),

Figure 2J Conceptual Framework for factors influencing Effective Revenue Collection

The conceptual framework consists of the independent and dependent variables as well as the

intervening variables. The independent variable is revenue collection and dependent variable is

service delivery, whereas the intervening variables consist of the various regulations that

significantly influence both the independent and dependent variables

The independent variable is perceived as the revenue collection and the dependent variable is

service delivery. The independent variable focuses on Trading license. Market dues, Land

fees/ground rent and Parking whereas the dependent variable concerns with health, education and

water.

2~3 Empirical Review

The empirical review of the study is based on research objectives as indicated below;

2~2 Conceptual Framework showing Independent and Dependent Variables

LV (RC) DN (SD)

Service ~Del.iveiy• Health• Education• Water

10

23,1 Methods of Revenue Collection

According to the Local Government Finance Commission Act of 2004, revenue collection is

important to local governments for a number of reasons like promoting the autonomy of local

governments, maintaining and sustaining investment and savings, meeting the co-funding and

borrowing obligations, financial council operations and funding other locally prioritized services

and projects. (Surrey, 1974) contends that the basic collection administrative procedures include

identifying and locating tax payers, checking on tax payers’ compliance and collection of taxes.

(Vehorn & Alunad, 1997) also shares on this on this view while commenting on sub-national

administration generally and (Silivan, 1992) concluded that revenue collection will result

specifically from taxpayer registration, training data processing, tax payers relations and

simplification forms (Byarugaba, 1995).

According to Bahiigwa et al (2006), the adoption of fiscal decentralization in Uganda saw many

local governments involved in the collection of taxes using public servants. However, they further

observed that due to the increasing appetite for tax base expansions and outsourcing of tax

collection, private tax collection or tax fanning was adopted as an innovation. This private tax

collection or tax fanning is what Stella (1993) defines as a system wherein, the tight to collect

certain taxes owned by the state is auctioned off to the highest bidder (Manor, 1998).

As one of the strategies to increase local government revenue, Uganda adopted the use of private

firms for this purpose. This was one of the popular strategies to remedy problems of revenue

mismanagement in local governments. The end result would be to improve revenue collection

efficiency, effectiveness and accountability. (Tungodde, 2003) support this argument saying that

privatization of government services was rapidly becoming a key feature in the management of

revenues in developing countries. They observed that the present enthusiasm for private tax

collection among bureaucrats, and other participants in the policy debate on local government

finances was echoed as increasing efficiency and effectiveness.

In Uganda revenue collection has been facing a declining trend over the years which need attention

to focus on the underlying causes of this declining trend. Local government revenue sources have

faced a drastic decline and therefore have to depend on the central government funding which

Ii

accounts for 95~98% of their budgets. Transfers to local governments as a percentage of public

expenditure has fallen from around 47% in 2001/2002 to about 22% in 2008/2009. Thus, meaning

more resources are being retained at the centre (Kadiresan, 2009). in this view, a number of studies

have been conducted to reverse this trend among which is the invento~ of best practices by local

authorities inspection department (Ministry of Local Govenunent, 2004) and other factors given

for this trend include; over reliance on graduated tax, i~orance and existence of obsolete tax laws

like Propery Tax (Rating decree) 1997, Town and County Planning 1964, Public Health Act 1969,

Liquor Licensing Act 1967, Mbrkets Act 1942 and others.

In local government, revenue collection can be improved through sensitization of tax payers

(Lubega, 2000) as means of shaping their attitudes and ensure compliance to tax payers.

Regulations 28 and 34 of the Local Government Financial and Accounting regulations 1998

highlights duties of revenue collector, guides revenue collectors on accountabili~ of revenue

collected.

In some instances where low revenues are collected, so as to enable delivery of services, it is

attributed to uneven tax administration, (Silivan, 1992). Revenue collection has to comply with

certain general principles of raising revenue and how these principles should be fair, convenient

and certain. The collection and administration of revenue must be economical to the collectors and

administrators (Katarikawe, 1996).

However, Stella, 1993 is against decentralization that if local authorities are left to make decisions

for themselves, govern themselves, they will be less competent and more colTupt , abuse their

powers and be unable to collect revenues due to public pressure since few modern sates have

ranted private collection a permanent stature in their revenue generating process. ~Miksell, 1986)

observes that the resources used in revenue collection pro~de limited or net ser~ce and that is

why (Musgrave, 1969) stressed that in pursuit of fiscal policy and achievement of optimum tax

revenue levels, minimum administration costs have to be incurred in the tax revenue collection

process.

12

2~3.2 How has the contributions of revenue collected helped in service delivery in local

governments

Uganda’s decentralization policy provided for the transfer of powers and functions from the central

government ministries and departments to local governments. This mandate is embedded in the

1995 constitution of the republic of Uganda. The provision of basic services such as water and

sanitation, healthcare, primary education, feeder roads and agriculture extension services are left

to the local governments. However, the recent policy changes in fiscal decentralization have

brought questions about the capacity of local governments to effectively deliver services and

ensure value for money in public expenditure. Some government policies which have had alarming

impacts include the creation of new districts and the abolition of graduated tax. The creation of

new districts has put more expenditure pressures on the local governments, reducing and in some

cases taking away completely resources that would have been used in increasing and improving

service delivery (Kadiresan, 2009). This therefore calls for placing “a high priority on delivery of

personalized efficient customer services” (Mourney 1991). Attitudes exhibited by service

providers, employees and managers must be aimed at developing good working relations and

ensuring that customers are handled well while being served, (Musgrave, 1991), Defined public

sector as “those industries and services in a country that are owned and run by the state, such as

“the education and railways (in many countries) in comparison with private sector. Thus, delivery

entails public sector delivery mechanism to the local residents of the local government.

(Nangobi, 1987) defined service delivery as an “attitude or dispositional sense, referring to the

internalization of even service values and norms” ~Nangobi, 2000) said that service delivery is

concerned with supplying “superior products” based on the opinion of the customer. Whereas

(Kitimbo 1995) asserts that service delivery should be desi~ed in such a way to provide maximum

levels of location and time (Cousell, 1994) confirms it by saying that location of service delivery

and their accessibility contribute to customer needs and preferences satisfaction.

According to the National Service Delivery Survey (NSDS) 2000, it was noted that, effectiveness

of service delivery in local governments can be gauged by the expenditure amnounts allocated to

various service items in regard to the National Programmes Priority Areas (NPPA). This report

included some other attributes like the perception of perception of service delivery and level of

13

achievement of value for money by the locals, to detennine the level of achievement of local

governments in attaining reasonable levels of service delivery to its residents/taxpayers.

In contrast. (Bingling, 1997) requires that service delivery should take into consideration the

completion rate and recovery rate by service providers and (Minnesota. 2008) found out that since

technocrats undertake service delivery on behalf of governments, thus there is need for “a bottom

up “prioritizing to have effective spending public funds.

If prioritizing is not taken into consideration, only those governments that take the decision to

provide an effective service delivery, architec~jre will be able to cost effectively meet citizens

continually rising expectations of government services (Stevens James, 2005). (Weng, 2005)

argues that since service delivery remains agency~centered such that government forced citizens

to interact with them the way they are organized instead of the way that best makes sense from

citizens’ perspective, some of the services provided remain unattended to.

According to the Uganda Particulars Assessment process Wakiso District report (200]), it was

indicated that people are unhappy ~th the service provision. The locals are much concerned about

the quality of the services yet most of the poor are scared of inaccessible services, the quality of

health service delivery for example are mentioned to the poor and consultants attribute the poor

service delivery to mismanagement of public funds, lack of transparency, accountability and

consultation from the poor people who never get to know of the services provided and participate

little or not in planning for their funds.

Thus from that above discussion, there is need for local governments to provide enough

information concerning service delivery to the residents. In a budget, service delivery can be

strengthened through a number of ways; improved service delivery and Strengthened governance

and accountability. However, (Zola. 1997) notes that despite the governments’ determination and

commitment, some of their expectations will take long time to be realized because we have to live

in the resources that our country can afford. Tax evasion and avoidance is also explained by

(Suavely, 1998) that compliance for locals to pay taxes to finance service delivery requires sending

messages in the media tracing the benefits of compliance,

According to (Abigaba, 1996) the decentralization of local authorities had a loophole in the

revenue collection and efficiency of service delivery. This was due to the fact that laws were not

14

clear at times at who should collect revenues and to whom to offer the services, the poor accounting

system, untrained personnel and politicians all affected the performance of local authorities. This

is in agreement with (Babiiha, 2002) who noted that the sub-counties in Mbarara district give water

programmes a less priority thus giving minimal funding hindering construction of new and

rehabilitation of old safe and communal water sources.

The Local Government Finance Commission has focused on three areas of improvement in order

to enhance revenue collections. These are; improving co-ordination amongst central institutions;

facilitating policy debate to infonn the LGFC and MoLG on policy and legal improvements; and

enhancing the capacities of local governments to raise more revenue collections by encouraging

them to implement best practices.

To facilitate the implementation of these revenue enhancement objectives, the LGFC established

a Revenue collection Enhancement Co-ordinating Committee (LRECC) in April 2002. The main

tasks of the LRECC are to co-ordinate and suppoil the development of conducive decisions and

policies regarding revenue collection and to enhance the capacities of local governments to

effectively and efficiently generate and manage sustainable revenue collections.

2.3.3 The challenges faced in revenue collection

Similarly, Kiser (1994) observes that there is a dilemma in monitoring the process of private

revenue collection, This is attributed to the limited resources and skills needed in the process of

revenue collection. This creates a challenge where the unskilled private revenue assistants fail to

make proper estimates on the revenues and revenue potentials of some revenue sources. The

scholar further notes that the uncertainty about the size of the tax base represents a key aspect of

this monitoring problem. Stable revenue bases reduce the difficulty of the monitoring problem and

enable the drawing ofmore accurately predictable revenue flows. Indeed as observed by the author,

it is worthy appreciating especially in relation to the challenges related to poor technical skills in

revenue collection firms (Tungodden, 2003).

Revenue collection and management. (Cheasty, 1996) gave the factors for the decline of revenue

collection as politics, declining tax bases that are a sharper decline in taxed activities, retailers

failing to pay taxes because of minority policies, unemployment and deficiencies in governance

that is tax administrator service delivery in the local government finds it difficult to deal with

15

criminal elements (Yankelovick, 1984) stated that sizeable share of the population regard the tax

laws as unfair. Empirical studies on tax compliance are handicapped by data scarcity. Revenue

authorities do not reveal their audit strategy and official respect for tax payers’ privacy further

limits a researcher’s access to data.

Tax administration, A survey by (Wadhawan and Clive, 2001) reveals that uneven tax

administration in Africa is a major contribution to revenue shortfalls that augment inflationary

pressure while depriving governments’ resources with which to provide public goods. Uneven tax

administration also stimulates resort to more easily collected taxes on forei~ trade with associated

efficiency losses (Wadhawan and Gray, 2001) noted that theoretical and empirical research on

why persons subject to tax comply or fail to comply with their legal liabilities has been pursued

by social scientists from various disciplines. The direct benefit of successful tax evasion is obvious,

it is the value of the payments evaded, comprising their resources thereby saved. Drowning from

reference group theory (Grasmick and Scott, 1982, Thurnian, 1986, Dickens, 1986) attribute tax

evasion to a norm neutralization process that is tax evaders justifying their cheating by the belief

that everyone else does the same thing and or the benefit they receive from government fall below

their share of the tax burden.

Political interferences. A survey carried out by the Uganda Local Government association

(ULGA) released, indicated that politicians are “continuously and unlawfully awarding themselves

tenders”. The Local Government ministry and the development network of indigenous people

organization (DEV1VA~ also support the study. It alleged that politicians’ pressure and influence

the procurement committees to award tenders. The association noted that this led to shoddy work

and substandard services because the companies are hard to supervise (Tungodden , 2003).

Inappropriate laws governing property rates and trading licenses, Some of the laws governing

property rates and trading licenses are not appropriate in Local Governments. Some of these laws

will be appropriate in big commercial centres where the tax base regarding property and trading

licenses is high unlike the rural based Local Governments, hence low revenue collection.

II

Inadequate record keeping by the authorities. This greatly affects accountability as far as

revenue collection, is concerned. Although some records are essential in tax administration in

Local Governments, they do not always achieve the desired goal because they are always abused/

misused by the revenue authorities (Tungodden , 2003).

The weak tax~benefit linkages. This has greatly led to poor revenue collection as the masses fail

to realize the pu~ose of paying tax yet they do not directly benefit from the fruits of taxation. In

some instances, the poor tax~benefit linkage has resulted into violent strikes especially towards the

tax administrators who are regarded as daytime robbers.

A challenge of tax assessment collection and administration, It is worth noting that the tax

assessment collection and administration is a very big challenge. For example, the apportioning of

the tax burden to the potential taxpayers is unfair. h~ most cases, the process of tax assessment

lacks both horizontal equity as well as vertical equity. Unfair taxes are imposed on the people and

this is partly due to the undefined sources of income as well ignorance about the true nature of a

tax system by the tax authorities hence leading to poor revenue collections (Fjeldstad, 2003)

Poverty among the taxpayers. Most of the potential taxpayers in Mbarara District Local

Government are poor, as some live below the poverty line. This means that the tax authorities are

left with a small number of individuals who taxable and who have the tax capacity. Tax capacity

is the ability of a taxpayer to pay a tax assessed on him and remain with enough disposable income.

Hence, the low taxable capacity affects revenue collection and hinders effective service delivery

(Gray, 2001).

Poor motivation to tax authorities, The tax collectors are not well motivated in terms of material

and financial incentives and yet lack the moral support from the top District authorities. For

example, they collect a lot of revenue in comparison to what they earn as salaries or wages yet the

exercise involves high risks like violence in form of tax riots, harassments, as well as assault from

the potential taxpayers. The poor motivation has caused complacency, neglect, and more so bribery

and corruption among the tax collectors (Satich, 2001).

17

2A Solutions to the challenges faced in revenue collection

Although Uganda’s revenue performance has improved remarkably in nominal tenns from 1986

to 2006 as a result of these changes, it is still comparatively low and clearly does not meet

Uganda’s needs as measured against optimal levels of public expenditure for the country. ft is

therefore accurate to conclude that the government must improve its tax policy to increase

government revenues, but in a way that takes the realities of Uganda’s social and economic

structures into consideration. The challenge of inefficient domestic revenue mobilization carries

important policy implications for Uganda (among which are included bad public services and

increased debt), because domestic revenue production has not improved significantly despite the

many changes the government has made.

Substantial powers, flmnctions, and responsibilities are devolved to local governments by the LGA.

Local governments have the power to make and implement development plans based on locally

determined priorities. They have the power to make, approve and execute their ow~ budgets; to

raise and utilize resources according to individual priorities after malting legally mandated

disbursements. Similarly, local governments can make ordinances and by laws which are

consistent with the constitution and other existing laws, ordinances and by laws. in addition, local

governments are mandated to hire, manage, and fire personnel. They manage their own payroll

and separate personnel systems.

The introduction of neo-liberal refonns under structural adjustment programmes (SAP) with

emphasis on liberalization, downsizing and changing tax policy as well as tax administration has

brought to the fore the urgent practical necessity of increasing revenues, which will enable the

state to deliver basic services. In fact, revenue maximization is the primary objective of tax policy.

The informal sector therefore becomes the obvious avenue to be drawn into the tax net having

been mostly out of it.

In fonnalization might be indicative of the fact that operators see no value in engaging with the

state in the protection of life and property, and therefore legitimacy becomes a serious concern. In

order to regain legitimacy, governments are looking for ways to incorporate infonnal activities

I

into formal systems. Taxation is a good route into the problem, as it enables governments to

recognize informal activities without legitimizing the breaking of other rules and regulations.

A classical economist Adam Smith (1776) put forward the canons or general principles of taxation

which he said should be observed when imposing a tax, and these are; equity, certainty,

convenience, productivity, buoyancy and economy. These canons if followed in tax assessment,

coil ection and administration, improve on the Revenue collection and administration.

Convenience. Under the principle of convenience, Adam Smith stated that every tax ought to be

levied at the time that it is most likely to be convenient for the taxpayer to pay. He further said

that, both the time and mode of payment should be convenient. For instance, farmers should be

taxed when they sell their crops, office workers to be taxed when they receive their salaries, traders

taxed when they make profits (Tungodden, 2003).

Canon of Equity. Under the equity principle, Adam Smith Stated that the amount of tax burden on

taxpayers should be equal or proportional to their incomes such that the higher the income earners

pay more taxes (tax liability) than the low~income earners. Adam smith’s principle of equity is

based on humanitarian wounds. Equity takes two forms, horizontal equity, and vertical equity.

Horizontal equity means that people in the same income bracket should be taxed equally while

vertical equity means that people in different income brackets should be taxed differently.

Productivity. Tax productivity is the ability of a given tax to generate as more revenue as possible

to the Local Government. Therefore, a tax should be more effective and productive as possible.

The tax system should yield enough revenue to the treasury, so that the Local council does not

resort to deficit financing.

Certainty. The canon of certainty has to be put into consideration in order to improve on the

Revenue collection. The taxpayer mnust be protected fromn unnecessary harassment by revenue

officials by advocating for the certainty and non~arbitrariness of the taxes, fees, and charges that

each individual is bound to pay. This is because unpredictable taxes discourage investment and

reduce effort of work.

19

Economy. Revenue collection can also be improved by the principle of economy. The principle

stresses that the cost of collecting and administering taxes, fees and charges must be much lower

than the tax proceeds. The collection costs should not exceed 5°/s of the tax. It is meaningless to

impose taxes, which are widespread and difficult to administer as they impose an unnecessary

burden upon the society in the form of additional administrative expenses.

Flexibility/ Buoyancy. The tax should change directly with the change in tax base. A tax should

be able to change directly with the changes in the economic situations or incomes or tax bases with

the Local administration, for instance if the taxpayers’ incomes rise, even the taxes on them should

be able to adjust directly and taxes should reduce as incomes reduce. The fees/tax structure should

be adjustable to the changing requirements of the Local Govermnents with ease; and the Revenue

collection system should not be complicated.

Diversity. It is risky for the Local Government to depend upon very few sources of Revenue

collection such as a system is bound to breed a lot of uncertalnty for the treasury. If Revenue

collections come from diversified sources, then any reduction in a particular revenue item is bound

to be very small, hence the principle of diversity. However too much multiplicity of taxes should

be avoided as it may lead to unnecessary cost of collection and hence violate the economy

principle.

Fiscal authorities should be in position to predict and accurately forecast the revenue a particular

tax will generate and at what rate it will flow in, for this is because inelastic tax is usually

unproductive.

However, the various canons of taxation as put forward by Adam smith such as equity,

convenience, flexibility, certainty, may not fully help in tax assessment, collection, and

administration because of the nature or make up of the Local Governments. For example, it is

difficult to estimate the convenient period of paying taxes by some people who are in infonnal

sectors. With equity, it might be quite difficult to determine people who are in the same income

brackets because of the tendency of the tax people to be very secretive when it comes to disclosing

their wealth.

20

indeed, Adam smith’s principle of diversity may not be appropriate in less developed economies

where by the tax base is low with agriculture as the main economic activity. It can be asserted that

Adam smith’s principles of taxable can be more appropriate in developed countries with a variety

of tax bases and with a well-developed database about individuals and their incomes

2~5 Conclusion

Thus, there is need to carry out the study with an attention of tracing the loopholes in revenue

collections in relation to service delivery in the local government especially in Mbarara Local

government. So the local people should be satisfied on the importance of paying taxes so that it

becomes easy to collect the revenues from them without resistance. It has also helped the

researcher to define terms like revenue collection, service delivery, revenue collection which all

sumface in literature review. For instance, according to the (Local Government Act, 1997) it defines

revenue collections as the subtotal of all categories collected from a number of sources like market

dues, fines and penalties and parking fees. Service delivery is defined as the process of extending

basic services like education, healthcare, water, transport and communication where the end users

are the public or local people within the country (Tomkinson, 2007 pg 21 i). T~~ax administration

refers to the process of administering taxes like identifr’ing the tax payers, assessing them and then

levying reasonable taxes they are capable of paying.

2~6 Gaps in the Literature

The studies reviewed in this study revealed that major financial reforms in Kenya were introduced

in the 1 990s with an aim of improving service delivery and local infrastructure. However, few

studies have been done out to measure the effectiveness of the revenue collection on the

improvement of counties in service delivery. Many studies that have been done involving

management of revenues have always indicated that corruption could be the greatest factor

affecting service delivery and subsequent implementation of viable projects aimed at uplifting the

standards of living for the residents. With the introduction of county governments in Kenya,

counties have had to generate their own local revenues to enable them provide efficient services

to the public. Most reports indicate inadequate revenue collection by county governments. This

study was done to evaluate the factors influencing revenue collection within county governments

in Uganda.

21

CHAPTER THREE

RESEARCH MEl HODOLOGy

3M introduction

This chapter comprised of research design, study population sampling frame, sampling design and

selection, methods of data handling, data analysis. reliability and validity, ethical consideration

and limitations of the study.

3d Research Design

The researcher employed descriptive research design to describe the phenomenon as it exists,

comparative research design to compare local revenue collection and service delivery in Mbarara

local government, associational research design to get the causal effect and the impact of local

revenue collection and service delivery in Mbarara District.

3d Population of the Study

The study was carried out at h~arara local government an~ the respondents were selected from

Mbarara District local government staff that is, senior and junior staff from different departments

including 10 from health department, 10 finance department, 01 chairperson, 70 education

department, 30 water department). An accumulative figure of targeted respondents of 121 were

used as the population size.

Table 1: The target population and sample size

Population ~esize

10Finance department 10 10

~trictchai~erson~ I 1

~ 70 59

~ 30 2

~ 121 92~_

Health department 10

Source: Primary data 2019.

Source: Krejcie& Morgan’s (1970) table as cited by Kabuye (2015).

22

3~3 Sample size:

Curtis etal. (2000) emphasized that a sampling strategy should: stem right from the conceptual

framework; be able to generate a thorough database on the phenomena under study; allow the

possibility of drawing clear inferences and credible explanations; be ethical and feasible. As

seen in the table above, the researcher conducted the study on a sample of 61 respondents (51

quantitative responses and 10 key informant interviews). The sampling strategy was guided

by Krejcie & Morgan’s (1970) table as cited by Kabuye, 2015.

3.4J. Sampling desig.n,

The local government officials were selected depending on the level of offices they held while

at the lower level the sample members were picked at random The researcher used the non~

probability sampling design in most cases more so where the respondents to be involved was

many e.g. the beneficiaries of the services. Selective and purposive sampling in the revenue

department was used because of their knowledge in this subject matter and Simple random

sampling method was used to ensure that each element in the study have equal chances to be

included in the sample.

3~4~2 Sampling procedure

The researcher employed random and purposive sampling techniques to obtain the population

required. Purposive sampling was used to select the respondents from the administration of

Mbarara District, leadership, and the community members from the district simple random

sampling was used in the selection of in embers of the community. The technique ensured an equal

representation of the respondents in their position and it helped to get key reliable and grass root

data.

3.5 Data Collection Instruments

Data collection was done using primary and secondary sources in order to get accurate data. The

primary data was obtained through questionnaires and interviews.

3.5.1. Questionnaire

The use of questionnaire as a technique of data collection employed. This involved writing dowfl

questions to the people to tick the right alternative and fill in the questionnaire. The method was

23

The respondents were free and willing to provide the necessary information without coercion,

intimidation or payment/bribery.

The letter was taken and presented to local government of seeking permission to carry out the

study. A letter of consent was received and the researcher went ahead to identify respondents for

the study.

25

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4~O Introduction

This chapter presents the findings on the evaluation of revenue collection performance and

service deliveiy in local Governments. Through data analysis and interpretation, the researcher

tried to answer each of the research questions in chapter one, executed with the help of

questionnaires in addition to observations and interviews conducted in the research.

From these findings, the researcher draws conclusions and recommendations.

Response rate

The researcher distributed 110 questionnaires but 92 were completed and utilized in the analysis.

This shows a 83% response rate.

4d Socio~demographic data

To appreciate the reliability of the research findings, the researcher identified the respondents’

demographic data in respect of Gender, Age, and Education level.

Table: 4, 1 Gender Distribution of the Respondents.

Gender Frequency Percentage

Male 40 43.3%

[ Female 52

Total 92 100%

Source: Primary data

The source used to obtain data was basically primary. The table shows that the major

respondents were female taking 56.7 percent and the males took 43.3 percent as far as response

is concerned hence an indicator that females were positive in responding to the researcher’s

questionnaires as compared to the males. Implying that more females participated in the study

than male. This was because females were involved in various local govermnent activities

compared to the male who were involved.

26

4,1.1 Age of the Respondents

The table below summarize the age of respondents in local government established during the

study.

T~p~~4~2 TheA of the Respondents. _________

Age bracket freuuencv percentacesl8~25 23.6%25~32 ~137 40%32~above I 33 36.3%

92 [100Source: Primary Source

From the table above, 23.3 percent of the respondents were of the age group between 1 8~25

years, 40 percent were of the age group 25~32 years, while those of 32 years and above were

at 36.7 percent. The majority of the respondents belong to the age group 25~32 because they

have a clear understanding of issues to do with revenue collection and service delivery. This

means that the study covered relatively mature population,

4.1.2 Education Level of the Respondents.

Table: 4. 3 The Education Level of Respondents

Education level Frequency Percentages

~ Degree 18 j 20%

~Diplorna 31 33.6%

Certificate 43 46.3%

Total 92 100

Source: primary data.

The research findings showed that 20% of the workers were graduates, 46.7% were diploma

holders, and 3 3.3% were certificate holders. The highest percentage of diploma holders

showed that the District Local Government employs workers who were in oderately qualified

and the researcher recommended that such workers should go for further education.

27

4~L3 When the respondents joined

Table: 4. 4 Showing when the respondents joined the district

Year Frequency Percentages (%)

0~1 37 40

1-5 55

Source: primary data

This shows that most respondents have worked with the disfrict for more than one year that is 60

percent and 40 percent of the respondents have worked for one year and less. This implies that

majority of the workers have experience with revenue collection and service delivery.

4J.4 Occupation of the respondent

Table: 4~ 5 Showing Occupatioii. of the respondents

Occupation Frequency Percentages (%)

Civil servant 46 50

Others 15 16.3

Coinmunityinember 31 1 33.6

Total 92 100

Source: primary data

From the table above, the majority 50% were civil servants, 33.3% were community members,

and 16.7 % were others, which included the Ngo workers, volunteers, This implied that the

majority are civil servants who take much in policy formulation and sensitization of revenue

collections.

28

4~2~O Objective 1: Methods of local revenue collection

This section presents results of the research project afier infonnation collected was critically

analyzed, The results have been presented in accordance with the research objectives that guided

the study. Tables and pie charts have been used in the presentation.

4.2J Methods of local revenue collection in Mbarara Local Government

Data obtained through the completed questionnaires and the interview guide indicated that all the

respondents agreed that there are methods used to collect local revenue. Table 1 below presents

the responses to research objective one.

Table 1: Methods of local revenue collection in Mbarara local government

Are there methods used to collect local Frequency Percentage

revenue

iYes 92 100

No 0 0

Total —— 92 100

Source: Primary data 2019

Table I above shows that 100% of the respondents accepted that there are methods used to

collect local revenue in Mbarara Local Government, This means that there are methods used in

revenue collection which are indicated in the table 1 above.

Table 2: Methods used to collect local revenue in Mbarara Local Government

Methods used to collect local revenue Frequency Percentage

Self-assessment collection 31 34

Private revenue collection (Tendering) 29 32

Public servants 13 14

others 19 20

Total 92 100

Source: Primary data 2019

According to the study finding, 34% of the respondents revealed that local revenue is collected

using self-assessment method. Where tax is assessed and tax payers are given receipts that is tax

collectors whom they identified as revenue enforcement officers collect money amid bring bank

29

Yes 1 8 96

No 4 4

Total 92 100

Source: Primary Data 2019

The study findings indicate that 96% of the respondents agreed that their Services has been

delivered to Mbarara Local Government while 4% said that there are no services delivered. And

table 3 shows the services delivered to Mbarara local government,

Table 4: The services that have been delivered to Mbarara loca.l governmentServices delivered ~Frequency ~

Garbage collection 7 8

J~lapii~~~ 30 34Road constniction & maintenance 19 20Health centres &medical facilities ] 9 20Free education and construction of schools 6 6Security, law enforcement environmental al protection 1 1 12

Total 92 100Source: Primary Data 2019

According to the study findings in table 9 above, 8% of the respondents cited the garbage collection

as one of the services delivered to Mbarara local government. In their view, the respondents

contented that the Local revenue has helped the division to remain smart by daily collection of

Garbage.

34% of the study findings also revealed that there has been town planning which is a technical and

political process concerned with the control of the use of land and design of the urban environment.

Whereby they identified transport network, to guide and ensure the orderly development of

settlements.

The study also revealed that out of 50 respondents, 20% revealed that among services delivered,

there was road construction and Maintenance which has helped the division to ease transport

services and enhanced businesses in the Town Council.

Table 3: Has revenue collected helped in service delivery to Mbarara Local Government?

~Responses~Frequency Percentage

31

It was also revealed that 20% of respondents indicated that there was provision of health centres

and medical facilities. They quoted some of the health centres put in place like “Mbalara Local

goverment health centre, Mbarara health centre and that these health centres has helped them in

terms of medical facilities.

While 6% talked about provision of free education and construction of schools where by the

revenue collected is distributed among wards and each ward is divided into parts (LC1) and each

LCI is represented by 10 children to be paid for by the division, Also the division is having some

schools whereby it provides the necessities like staff salaries books, cleaners, buildings and other

school requirements.

12% of the respondents cited that there has been provision of other services which among others

included; environmental protection security facilities, Project funding, supporting agriculture, law

enforcement which broadly refers to any system by which some members of society act in an

organized manner to promote adherence to the law by discovering and punishing persons who

violate the rules and norms governing that society.

4~4 Objective 3: Challenges faced in revenue collection in Mbarara Local Government

This sought to establish the challenges faced in revenue collection while implementing and

delivering services and the data is analyzed according to the respondents’ responses from the data

obtained from the collected questionnaires and interviews.

Table 5: The challenges faced in local revenue collection in Mbarara Local Government

Are there challenges faced in revenue collection? Frequency Percentage

~—~--- 79

~ 13 14~Total 92 1 100

Source: Primary Data 2019

Table 10 above shows that majority of the respondents 86% revealed that there are challenges

faced in revenue collection Mbarara Local Government. This is compared to the least number of

the respondents totaling to 14% who contended that there are no challenges faced in revenue

collection. These respondents believed that there are no challenges faced in local revenue

collection though they never identified the reasons why there are no challenges.

Table 6: The challenges faced in revenue collection Mbarara local government~ercentage

Hard to monitor 31 j 34

~ Limited resources and skills 15 16

Corruption 2 2

~ Late assessment 33 36~

Others ii 12

Total — 92 100Source: Primary Data 2019

The researcher observed that revenue collection is facing challenges in Mbarara Local

Government; which among others include; It is indicated that 34% of the respondents revealed that

it is Hard to monitor revenue collection especially when private collection is being used This is

also in line with what Kiser (1994) observes that there is a dilemma in monitoring the process of

private revenue collection. Additionally~ Svensson (2003) looks at revenue collection as associated

with the challenge of monitoring especially with the intention of curbing all the associated

inefficiencies,

While 16% contented that the revenue collection in the Division is faced with the challenge of

Limited resources and skills. 36% of the respondents revealed that there is a challenge of late

assessment and the respondents also said that assessment sometimes delay and this affect the

paying process making it hard to collect revenue in time as well as service delivery.

2% of the respondents revealed that corruption is also a challenge to revenue collection. This is in

line with what Svensson (2003) said in chapter two that it is further observed that vulnerability to

corruption and tax evasion were common features of all tax systems in developing countries and

this intensified the burden for monitoring. Lastly 12% of the respondents revealed other challenges

33

like double assessment, higher taxes being assessed ilTespective of the business size, Services

delivered are not equivalent to the taxes paid.

4~5 Measures to overcome challenges faced in revenue collection in Mbarara Local

Government

Table 7: Measures to overcome challenges faced in revenue collection

Solutions Frequency Percentage

Identifying other sources of funds 33 36

~ 20 22

as ent an elationsl between t 17 18

payers and tax collectors

Sensitization and mass education to local tax payers 1 11 12

~‘ing copies of tax rates to tax payers 11 - 12

Total 92 100~

Source: Primary Data 2019

According to the study, 36% of the respondents revealed that in order to overcome the challenge

of limited fund and resources. Other sources of funds should be identified such as local government

fund, Matooke sellers should also pay tax in order to increase on local revenue as well as service

delivery, While 22% of the respondents identified other measures like fair assessment and good

relationship between tax payers and local revenue officials in order to make it easy for them to

take their complaints and negotiation in case over double assessment, over assessment and this

will help them to pay in time and avoid delay.

Early assessment of taxes. This was revealed by 18% of the respondents, “They say that trading

license is for the whole year, so when they assessed me in October and yet the year was ending I

decided not to pay because the year was ending and I couldn’t pay for two months remaining when

knowing that next year am to pay again.” It was mentioned during the discussions with the

respondents and it was said by a respondent from Mbarara local government ward. Therefore, they

revealed that when tax is assessed in time, they get prepared and pay in time.

Sensitization and mass education to local tax payers was also identified as one of the measures and

this was revealed by 12% of the respondents. One of the respondents from Mbarara local

government ward. Said; “We fail and we refuse to pay these taxes because we don’t know the

reason why we are paying” and this can be avoided by sensitizing them about the role of local

revenue towards service delivery.

Lastly 12% of the respondents revealed that they should be given copies of tax rates and they know

how much they are supposed to pay. “How do I know that I belong to grade one or two?” This was

said by one of the respondents from Mbarara local government who said that they normally see

people assessing and giving them assessment papers not knowing how they are graded. Therefore,

there is need for copies of tax rates alongside assessment fonns.

35

CHAPTER FIVE

DISCUSSION OF FINIDINGS, CONCLUSION AND RECOMMENDATIONS.

5.0 Introduction

This chapter includes the summary of findings, conclusions, and recommendations of the study.

5.1 Summary of the findings:

The study was meant to evaluate local revenue collection performance in relation to the servicedelivery in local governments with specific reference to Mbarara district local government.

5.1 Discussion of the study findings according to the objectives of the study.5.1.1 To establish the methods of revenue collection in Mbarara local government.

Findings from the research study show that Mbarara local government collects local revenue from

different sources and they include licenses and permits, parking fees, fines and penalties, rent and

rates, market dues in order to deliver services to the people.

The study findings are supported by the views of the key respondents for example the chie~

Administrative Officer who said ~‘we have adequate revenue from sources such as parking fee,

fines, market dues that help in service delivery”.

5.1.2 To find out how revenue collected has helped in service delivery in local governments

In Ivlbarara local government local revenue collected has led to improved service delivery and the

services that have been delivered include extension of agricultural services, boosting primary

education, construction of health centers’, construction of feeder roads, maintenance and

sustainability of development projects like early and child nutrition, provision of safe drinking

water and sanitation services, financing sporting activities, financing the registrati~ ~f tax payers

and training their employees to ensure maximum production in Mbarara local government.

5.1.3 To find out the challenges faced in revenue collection in Mbarara local government.

The study findings are supported by researchers like Kiser (1994) who in his study observes that

there has been low local revenue collection in Mbarara local government and this has been due to

the harshness of tax collectors, high administrative expenses corruption practiced by revenue

officers inadequate sources of revenue, political intervention for example tender defaulters who

-I

supported politicians during campaigns are being protected by tax authorities, poor enforcement

of rules and procedures of collecting revenues, tribalism, low incomes and wealth which reduces

the tax base thus leading to low local revenue collection and thus low service delivery in Mbarara

local government.

5~2 Conclusions

5.1.1 To establish the methods of revenue collection in Mbarara local government.

Based on the findings of the research, nature and the magnitude of the role of local revenue on

service delivery in Mbarara Local Government. It has also identified challenges faced in revenue

collection, and the recommendations to make the service delivery successful in Mbarara Local

Government, 512 To find out how revenue collected has helped in service delivery in local

governments.

5.1.2 To find out how revenue collected has helped in service delivery in local governments

It is concluded that Local revenue have a positive impact on service delivery in Mbarara Local

Government and when local revenue is collected, services like infrastructure, town planning,

public libraries, garbage collection and education facilities are provided. Therefore, local revenue

should be collected.

5.1.3 To find out the challenges faced in revenue collection in Mbarara local government.

Local revenue in Mbarara Local Government is faced with Limited Resources and skills,

comiption and political influence, hard monitoring systems and late assessments which make

service delivery hard to implement effectively. Lastly, the study concludes that local revenue has

a positive impact on service delivery in Mbarara Local Government.

5,3 RecommendationsBasing on the discussion of the study findings, conclusions of this report, the study recommends the

following;

37

5.1 .1 To establish the methods of revenue collection in Mbarara local government.

There should be increase in service delivery that is establishment of infrastructure like roads,

bridges, electricity, schools and hospitals to attract investors and developers in the division in order

to expand tax base.

Enough sensitization. People should be sensitized over different medias like radios televisions

workshop about the role of local revenue in service delivery and they should also be informed

about what they use their money for.

5.1.2 To find out how revenue collected has helped in service delivery in local governments

Timely accountabili~ to tax payers should be done in order to avoid wastage of local revenue

collected and ensuring proper allocation of services to the cominuni~.

Trading licence act should be amended to match the calendar year with in financial year. This

should be done by early assessment of trading licenses in order to avoid delay in payments.

Study findings also revealed that there should be computerization of data captured during

assessment .This can improve supervision, monitoring and ease local revenue collection.

5.1 .3 To find out the challenges faced in revenue collection in Mbarara local government.

Identification of other sources of income so as to boost tax base for example some activities which

are being carried in the Division should start paying taxes in order to increase on revenue and

service delivery as well.

Tax should be paid in installments in order to make it easier for tax payers who cannot afford the

whole amount assessed. This was suggested by tax payers who have small businesses and they

revealed that when they decide to pay the whole amount, their businesses end up being affected

by the amount removed from them.

38

5~4 Suggested areas for further research

The study focused on the role of local revenue on service delivery in Mbarara Local Government,

for a comprehensive and exhaustive study to draw conclusions the study recommends further

research on;

o The sources of local revenue in Mbarara Local Government

• More research should also be conducted on ways of enhancing local revenue base in local

government.

3

REFERENCES

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Taxation in developing countries, London: Cambridge university press.

Babiiha, John, (2002). Social capital civic participation and community development, A case study

on the success of WES programme in Mpigi district, MBA dissertation (unpublished).

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Report Economic Policy Research Centre; KIU: Kampala; 64-98,

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Bird, M and Francois, (1998); Fiscal Decentralization in Developing Countries; Cambridge

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Birungi P. and Mutenyo J. (2000) Principles of Economics, 1st Edition.

Boadway, & Roberts (1994), “The reform of fiscal systems in developing and emerging

market economies: a federalism perspective”, Policy Research Working Paper Series

1259. The World Bank, pp. 16.

Boyne, (1998), Public Choice Theory and Local Government, Basting stoke, UK Macmillan.

Burke F (1964) local Government in Uganda and politics in Uganda. New York Syracuse

University Press

Buse. (1994), The World Health Organization and Global Public Private Partnerships~’. In

Search of Good Global Health Governance, WHO, New York, pp.56-70.

Byarugaba F (1995) Ministry and District Review in Uganda. Findings and recommendation to

Aid implementation (Kampala)

Commonwealth (2003), ‘Public — Private Partnerships”: A Review with Special Reference to

Local Government” in Commonwealth Local Government Handbook. KPL. Rochester, pp

1-17.

Crook. R. & Manor J. (1998) ‘~Democracy and Decentralization in South Asia and West Africa”

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123-144.

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Ddungu, E. (1994), “Popular Forms and the Question of Democracy”, The Case of Resistance:

Councils in Uganda, M. Mamdani & J. Oloka Onyango (eds.) Uganda: Studies in Living

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56.

Fjeldstad 0-H, Tungodden B. (2003). “Fiscal corruption-a vice or virtue?” World Development

Report 31(8): 1459-1467.

Fritz. W. Bingling. (1997) Uganda telecommunications demand fore cast, 1 997-2006. 3rd draft

report. international telecommunication union.

Ghura D. (1998), Tax Revenue in Sub-Saharan Africa’~: Effects of Economic Policies and

Corruption. International Monetary Fund: Washington, IMF Working Pe Q3/135, pp.

7-12.

Gidman P I. Blore .3. Lorentzen and Schuttenhelt (1995), Public—private partnerships in urban

infrastructure services~: Urban Management Programme working paper series No.

4, Kenya. 3-17.

Iga, MP, 2002, The effect of administrative procedures on income tax collections. MBA,

Dissertation (unpublished).

.James, S. (2005), Collaborative service delivery of public sector, HLB publications. Local

Government Act, I 997(Entebbe, government printers).

Kajumbula. R (2003) Research on personal graduated tax administration, Revenue collection

perforrnance-Kampal a International University (unpublished).

Kigozi, R. (1996) Privatization of services in local authorities, workshop paper fiw s~iected district

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Kiser (1994), The World Health Organization and Global Public Private Partnershipse~. InSearch of Good Global Health Governance, WHO, New York, pp.56-70.

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Luzige, J, (2006), Local revenue collection and Service Delivery in Local Government A case

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42

APPENDIX I:

QUESTIONNAIRE FOR ADMINISTRATORS

Dear Sir/Madam,

I am Akankunda Lilian, a student of Kampala international University in Uganda, registration

number 11 63-060404M85 12, pursuing a degree in Bachelor of public administration carrying

out a research on the topic “Revenue Collection and Government Service Delivery in

Mbarara district”, I would like to ask some questions with references to my area of study, as

a requirement for the award of a degree of Bachelor of public administration. All information

givei~ was treated with a high4evei degree of confidentiality for study purposes only. Any

inconveniences are highly regretted.

Instructions

Please do not write your name on the questionnaire

Where options are given, please choose the right one. For structured questions, and answer in the

spaces provided.

Section A: Background iii formation of the respond.ents

1.0 Designation/Occupation

1,1 Location/Residence

1.2 Gender: Male Female

1. .3 Marital Status

Single Married Divorced

1.4 level of education

Others Cethficate Diplomas Degree

a) For how long have you served in Mbarara District Local administration?

Less than a year I ~3Years More than 3 years

43

APPENDIX II

QUESTIONNAIRES FOR THE COMMUNITY

Dear respondents;

I am Akankunda Lilian, a student of Kampala International University in Uganda,

Registration number 1 1 63-060404M85 12, canying out a research study on the topic” Local

government revenue and Service Delivery in Mbarara district, western Uganda. “Using

Mbarara district local govermnent as the case study.

You are therefore requested to answer the questions below by face to face interaction

with the researcher,

All information obtained was treated with utmost confidentiality

Part A: Bio data

1. Marital Status

(a~ Single ~ ~b)Manied ~ (c) Widow ~

2. Sexlgender

(a) Male I ~] b) Female

3. Age

(a) 2O~29 years ~(b) 3O~39 Yearl ~] (c)40-49 years~ (d) 4O~49

(e) Above 50 year ~

5) Do you pay taxes?

Yes No

44

Section B: To find out the methods of Ioca.I revenue collection in Mbarara Local Government.

7. Do you think there are methods used to collect local revenue in Mbarara local government?

(a).Yes (b).No ~

8. if ‘Yes’ what methods are being used?

9. If ‘No ‘how do think local revenue can be collected?

Section C: To find out how revenue collected has helped in service delivery.

10. Has revenue collected helped in service delivery in Mbarara Local Govermnent?

(a).Yes (b).No

II. If “Yes” Which services has been delivered to Mbarara local government?

12. if’No ‘why?

Section D: To find out the challenges faced in local revenue collection in Mbarara local

government.

13. Are there challenges faced in the local revenue collection in Mbarara local government?

(a),Yes (b)No

14. If ‘Yes’ what are challenges faced in revenue collection in Mbarara local government?

(You can give more than one answer)

45

15. If ‘No’ why do you think so?

16. How are the challenges faced in question (13) above hindering service delivery in Mbarara

local government?

Section E ~To docume.nt possible solutions to challenges faced in revenue collection in

Kakoba Division.

17. What do you think can be done to overcome the challenges faced in local revenue collection

in Mbarara local govermnent?

18. Do you think there is a relationship between local revenue and service delivery? (Specify)

19. In your opinion, what conclusions can you draw from the local revenue and service delivery

in Mbarara Local Government?

20. What recommendations can you draw from the concepts local revenue and service delivery in

Mbarara Local Government?

46

Section F: Relationship be~veen revenue collection and Service Delivery.

Please tick appropriately in the table below where,

YES= E~ NO= ~ NS=Not Sure

Thank you for your cooperation

ITEMS YES

Does the District Local Government utilize its revenue to provide services tothe People appropriatelyThe public gets services depending on the revenue collected by the District

Local Government

The district Local Government provides various services from the revenue itcollectsRevenue from donor funds is primarily used to provide basic services to thecommunityThe central Governments ensures that its grants to Local Governments are

~ suitably utilised to provide services to the community

~: The Local Government follows various rules and regulations during revenuecollection and service delivery

47

APPENDIX III

INTERVIEW GUIDEDear respondents;

I am Akankunda Lilian, a student of Kampala International University in Uganda,

Registration number i163~O6O4O4~O85l2, carrying out a research study on the topic” Local

government revenue and Service Delivery in Mbarara district, western Uganda” Using

Mbarara district local government as the case study.

You are therefore requested to answer the questions below by face to face interaction

with the researcher.

All information obtained was treated with uknost confidentiality

1) Does revenue collection enhance performance in the district?

2) Is there any improvement in the services and operations of the district?

3) Are you contented with the services delivered at the district?

4) Is revenue collection effective as far as service delivery is concerned?

5) What are the different sources of revenue of local revenue collected?

6) What are the challenges encountered in revenue collection?

7) Does the DCLG~utilize its revenue collection to provide service to the people

appropriately?

End of the interview Thank you

48