CHALLENGES FACED BY LOCAL GOVERNMENT …

1 I CHALLENGES FACED BY LOCAL GOVERNMENT authorities (LGAS) IN IMPLEMENTING STRATEGIES TO ENHANCE REVENUES: CASE OF DAR ES SALAAM MUNICIPAL COUNCILS PRISCA KIMARIO THIS DISSERTATION IS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE DEGREE OF MASTERS OF BUSINESS ADMINISTRATION IN THE OPEN UNIVERSITY OF TANZANIA 2014 ii CERTIFICATION The undersigned certifies that he has read and hereby recommends for acceptance by the Open University of Tanzania a dissertation entitled: CHALLENGES FACED by LOCAL GOVERNMENT authorities (LGAs) in implementing strategies to enhance revenues: The case of Dar es Salaam Municipal Councils.

2 Dr. Proches K. Ngatuni Supervisor Date .. iii COPYRIGHT No part of this dissertation may be reproduced, stored in any retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without prior written permission of the author or the Open University of Tanzania in that behalf . iv DECLARATION I, Prisca Kimario hereby declare that this dissertation is my own original work and that it has not been submitted for a similar award in any other University. Signature.

3 Date .. v ACKNOWLEDGEMENT Thanks are due to a number of people for helping make this dissertation a reality. I firstly thank the Almighty God for making everything possible. I am heartily thankful to my supervisor, Dr. P. Ngatuni, whose encouragement, guidance and support from the initial to the final level enabled me to develop an understanding of the subject. I also feel indebted to extend my sincere heartfelt thanks to all the lecturers who generously imparted the knowledge to me in my academic endeavors.

4 General thanks are to both Office of the Accountant General for financial support and my employer Ministry of Finance for releasing me to attend this programme as well as access data contained in this dissertation. I am also grateful to the offices of Kinondoni, Ilala and Temeke Municipal council for their support during data collection process, their contributions and are recognized and highly appreciated. I would like to thank various members of staff in GOVERNMENT offices especially Mrs. M. Mtanda and Mr E. L. Lovililo who were instrumental on different aspects in doing this work.

5 I owe my deepest thank to my friends for their pieces of advice, prayers, and love, which have contribution in completion of this work. Lastly, I offer my regards and blessings to all members of my family especially my children Frank and Faith for encouragement as well as accepting my absence at home during the whole period of study. Since it is not easy to mention everyone individually, I take this opportunity to thank all people who, in one way or another, kindly assisted me to fulfill objectives of this study. I also thank all of those who will choose to use this dissertation for reference and find it useful.

6 Vi LIST OF ABBREVIATIONS AND ACRONYMS BRELA Business Registrations and Licensing Agency BOT Bank of Tanzania CAG Controller and Auditor General CCM Chama Cha Mapinduzi DP Development Partners DFID Department for International Development GIS Geographic Information System IFMS Integrated Financial Management Systems IMC Ilala Municipal Council KMC Kinondoni Municipal Council LGAs LOCAL GOVERNMENT authorities LGCDG LOCAL GOVERNMENT Capital Development Grant MRECOM Municipal Revenue Collection Manager PMO-RALG Prime Minister s Office- Regional Administration and LOCAL Governments REPOA Research on Poverty Alleviations TRA Tanzania Revenue Authority TMC Temeke Municipal Council UBT Ubungo Bus Terminal URT United Republic Of Tanzania vii ABSTRACT The objective of this study was to identify the CHALLENGES FACED by LGA s in implementing strategies adopted to enhance revenue collections after rationalization of LOCAL GOVERNMENT taxes.

7 The study was carried out in Dar es Salaam municipalities, and found out that there is a gap that exists between LGA s budgets and revenue collections which range from 5 to 8 percent. The conclusion was based on the results from the analysis of all respondents from the study. To cover this gap LGA uses some strategies like outsourcing of revenue collection to private collectors, introduction of revenue managers, integration of Database (KMC,IMC,TMC& TRA ) and review of by laws. In implementing these strategies, they also face the following CHALLENGES like some of the taxpayer unwillingness to pay tax, political interference, outsourced revenue retained by agents, and Loyalty challenge.

8 Recommendations were made to the central GOVERNMENT to take a leading role in monitoring the returns to the public by creating public awareness and education the importance of paying taxes for their own benefit. LGAs have to design and formulate policy standards which will be adopted, applied to effectively implement that will facilitate collection of enough revenue for development. They are also supposed to generate revenue from LOCAL sources rather than depending on central GOVERNMENT grants. They are supposed to review bylaws, computerization of revenue management, outsource collection of some revenue to private agents, and strengthen revenue collection system, stronger punishment for council staff and agents found guilty of mismanagement of collected revenue.

9 Lastly taxpayers should play their role of willingly paying taxes for their betterment of themselves and the public at large. viii TABLE OF CONTENTS CERTIFICATION .. ii COPYRIGHT .. iii DECLARATION .. iv ACKNOWLEDGEMENT .. v LIST OF ABBREVIATIONS AND ACRONYMS .. vi ABSTRACT .. vii TABLE OF CONTENTS .. viii LIST OF TABLES .. xii LIST OF FIGURES .. xiii CHAPTER ONE .. 1 INTRODUCTION .. 1 Background to the Study.. 1 Statement of the Problem .. 4 Objectives of the Study .. 5 Main Research Objective .. 5 Specific 5 Research Questions .. 6 Main Research Question.

10 6 Specific Research Questions .. 6 Significance of the Study .. 6 Organization of the Dissertation .. 7 CHAPTER TWO .. 8 LITERATURE REVIEW .. 8 ix Overview .. 8 Conceptual Definitions .. 8 LOCAL GOVERNMENT authorities (LGA) .. 8 Revenue .. 9 Revenue Collection Strategies .. 9 Functions of LOCAL GOVERNMENT authorities .. 10 Main Sources of LGAs Revenues .. 11 Qualities of LOCAL authorities Revenues .. 12 Permitted LOCAL GOVERNMENT Taxes and Revenue Sources .. 12 Revenue Enhancement .. 13 Principles of Decentralization .. 14 Decentralization and the Financing dilemma.