LEGAL FRAMEWORK AND LOCAL REVENUE GENERATION IN WAKISO

MUNICIPALITY COUNCIL

BY

GODFREY JOSEPH

1163 —05014 - 06944

A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF ECONOMICS AND

MANAGMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE AWARD OF A BACHELOR’S DEGREE OF BUSINESS

ADMINISTRATION (FINANCE AND ACCOUNTING) OF

KAMPALA INTERNATIONAL

UNIVERSITY

AUGUST, 2019

1

DECLARATION

I GODFREY JOSEPH, declare that this is my original work and have not been submitted and

will not be presented to any college Institution or University for academic credit.

Signed Date ~ /~c IGODFREY JOSEPH

1163—05014-06944

APPROVAL

The undersigned certifies that he has read the research report and hereby recommend for

acceptance of the research entitled: Legal Framework and Local Revenue Generation in Wakiso

Municipality Council, in the fulfillment of the requirements for the award of the Bachelor

Degree of business administration (Accounting and Finance).

Sign ~

SUPERVISOR’S NAME & SIGNATURE

(~?i’372yo ~<DATE t.~Z7 ~/ ~t

DEDICATION

I dedicate this research report affectionately to my parents and relatives for the support through

the research and the entire course.

III

ACKNOWLEDGEMENT

My gratitude and praise to the almighty God by his grace I was able to complete this research.

Further my special appreciation to my supervisor Dr. Kirabo for his endless guidance and

patience through the entire course and particularly the research project.

Special thanks go to my classmates, especially members of my discussion group that always

encouraged me to move on despite the busy schedule at work. I owe you for the discussion group

that was meant to always create an environment of encouragement meaning I could always catch

up. I acknowledge Wakiso District administration for the timely information key for this research

project.

Finally I would like to appreciate my employer Ministry of Finance, Planning and Economic

Development for allowing me undertakes the course besides the demanding schedule of duties.

iv

TABLE OF CONTENTS

Contents V

DECLARATION

APPROVAL

DEDICATION

ACKNOWLEDGEMENT iv

LIST OF ABBREVIATION AND SYMBOLS xi

TABLE OF CONTENTS v

LIST OF TABLES ix

LIST OF FIGURES x

ABSTRACT

CHAPTER ONE 1

INTRODUCTION 1

1.0 Introduction 1~

1.1 Background to the study 1

1.1.1 Historical Perspective

1.1.2 Theoretical perspective 2

1.1.3 Conceptual perspective 4

1.1.4 Contextual perspective 5

1.2 Statement of the Research Problem 7

1.3 Purpose of the Study 7

1.4 Specific Objectives 7

1.5 Research Questions 8

1.6 Research Hypotheses 8

1.9 Operational definition of the key terms 9

CHAPTER TWO 11

LITERATURE REVIEW 11

2.0 Introduction 11

2.1 Theoretical Literature Review ii

V

2.1.1 LGAsinUganda. 11~

2.1.2 Models for Local revenue generation 11

2.1.3 Theory guiding revenue collection 13

2.2.1 Conceptual Framework 14

2.2 Conceptual Review 16

2.2.1 Revenue 16

2.2.2 Revenue Generation in Local Governments 16

2.3 Review of related literature 17

2.3.1 The nature of the local revenue sources existing in Local Governments 17

2.3.1.1 Revenue Sources 17

2.3.1.2 Collection of Local Revenues 20

2.3.1.3 Enforcement 21

2.4.1 The trend of local revenues in Local Governments 22

2.5 The factors affecting local revenue collection in Local Governments 24

2.6 The possible ways of improving generation of local revehues by Local Governments 28

Widening the town’s revenue sources base 28

2.7 Comparative Studies 30

CHAPTER THREE 32

RESEARCH METHODOLOGY 32

3.1 Introduction 32

3.2 Area of study 32

3.2 Research Approaches 32

3.3 Research design 33

3.4 Data collection 33

3.4.1 Primary data collection methods/tool 33

3.5 Population 33

3.6 Sample size 34

3.5.1 Sampling techniques 35

3.6 Data analysis techniques 35

3.7 Reliability and Validity of Measurements 35

vi

3.7.1 Reliability. 35

3.7.2 Validity 36

3.8 Ethical Consideration 36

CHAPTER FOUR 38

PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS 38

4.0 Introduction 38

4.2 Response rate 38

4.3 Demographic characteristics of the respondents 39

4.3.1 Respondent by Sex 39

4.3.2Age group of the respondent 39

4.3.2 Highest level of education of the respondent 40

4.3.3 Departments 41

4.3.4 Length of service at Wakiso District ~, .‘ 42

4.4 Descriptive statistics and qualitative analysis 43

4.4.1 The Nature of the Local Revenue Sources existing in Wakiso District Local Government 44

4.4. 2 Rating the level of effective collection of the sources of revenues in local governments., 45

4.4.3 Actions done to ensure that above~mentioned sources of revenue are effectively managed47

4.4.4 The category of payers to meet the burden of revenue payment in Wakiso district 4$

4.4.5 Estimate volume of revenue paid by revenue payers at Wakiso District 49

4.4.6 The actors used by Wakiso District Local Government in collecting revenue 50

4.4.6 The extent to which actors are effective in revenue collection 51

4.5 The trends of local revenues in Wakiso District Local Government in the last 5 years 52

4.6 The sectors mostly affected as a result of low revenue collection 55

4.7 Factors Affecting Local Revenue Collection in Wakiso District Local Government 56

4.7.1 Reasons for changing revenues collected from revenue sources 56

4.7.2 The extent to which factors influence revenue collection at Wakiso District Local

Government 5$

4.7.3 The extent to which the following factors contribute to the failure of revenue collection.. 59

4.8 The Possible Ways of Improving Generation of Local Revenues by Wakiso Local

Government 60

VT

4.9 Conclusion . Error! Bookmark not defined.

CHAPTER FIVE 63

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS OF TIlE STUDY 63

5.1 Introduction 63

5.2 Summary and conclusions 63

5.2.1 Nature of the local revenue sources Local Government 63

5.2.2 The trends of local revenues in Wakiso District Local Government in the last 4 years 64

5.2.3 The factors affecting local revenue collection in Wakiso District Local Government 64

5.2.4 The possible ways of improving generation of local revenues by Wakiso local government

65

5.3 Recommendations 65

REFERENCES 67

APPENDICIES 72

APPENDIX 1: LETTER OF INTRODUCTION TO THE REPONDENTS 72

APPENDEX II: QUESTIONThJAIRE 73

APPENDIX VI 82

PROPOSED BUDGET 82

APPENDIX V 83

TIME FRAME 83

VIII

LIST OF TABLES

Table 4. 1: Sample response rate 38

Table 4. 2: Major sources of local revenue for Wakiso Local Government 44

Table 4. 3: Rating the level of effective collection of the sources of revenues in local

governments 45

Table:4. 4: Actions done to ensure that above-mentioned sources of revenue are effectively

managed 47

Table 4. 5: The category of payers to meet the burden of revenue payment in Wakiso district .. 48

Table 4. 6: The estimate volume of revenue paid by revenue payers 49

Table 4. 7: The actors used by Wakiso District Local Government in collecting revenue 50

Table 4. 8: The extent to which actors are effective in revenue collection 51

Table 4. 9: The reasons for the trend in revenues collected over the last 4 years 53

Table 4. 10: The extent to which the following factors lead to low revenue collection 54

Table 4. 11: The sectors mostly affected as a result of low revenue collection 55

Table 4. 12: Reasons for changing revenues collected from revenue sources 56

Table 4. 13: The extent to which factors influence revenue collection at Wakiso District Local

Government 58

Table 4. 14: The extent to which the following factors contribute to the failure of revenue

collection 59

Table 4. 15: The possible ways of improving generation of local revenues 60

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LIST OF FIGURES

Figure 1: Conceptual Framework 15

Figure 4. 1: A pie — chart showing sex of the respondents 39

Figure 4. 2: A pie-chart showing age group of the respondents 40

Figure 4. 3: A Column graph showing highest level of education 41

Figure 4. 4: Departments of respondents 42

Figure 4. 5: A bar graph showing length of services of respondents 43

Figure 4. 6: Trend of revenue collections for the last 4 years 52

x

LIST OF ABBREVIATION AND SYMBOLS

CM - Corporate Management

CTI - Confederation of Ugandan Industries

GDP - Gross Domestic Product

LGA — Local Government Authorities

OECD - Organization for Economic Co-operation and Development

PAYE - Pay As You Earn

SPSS - Statistical Package for Social Sciences

URA - Uganda Revenue Authority

URT - United Republic of Uganda

US $ - United States Dollar

VAT - Value Added Tax

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ABSTRACT

The purpose of this study was to examine the legal framework on local revenue generation in

Wakiso District local government. Local revenue collection generates income for the local

government organization to finance the social services. Local collection source supports the

performance of Wakiso District. The study was guided by the objectives which include:

examining the nature of the local revenue sources, analyzing the trends of local revenues in

Wakiso District Local Government in the last 4 years, assessing the factors affecting local

revenue collection andpossible ways of improving generation of local revenues by Wakiso Local

Government. The study used a cross sectional study with both quantitative and qualitative

approaches. Primary data was collected on 300 respondents using closed ended and open ended

questionnaire and interviewed 7 respondents. Results on the major source of local revenues

reveled that business licenses, market fees property tax, fish levy, business licenses, fines,

penalties, revenue from agricultural and forestry products market fees, bus stand and car

parking. The trend of local revenue collection kept fluctuating over the period of time with the

tremendous decrease of from 2016 to date which justifies the poor performance at Wakiso

district due to inadequate financing of activities. The dominantfactors affecting changes in local

revenue collection include: incompetent revenue assessors, poor planning on revenue

management, lack ofenough equipment, failure to carry out feasibility study andfailure to notify

people on time of their dues poor assessment of tax which adversely affect the volumes of

revenue collection. However, low affordable tax rate influences compliance to local revenue

payments in Local Government. Strategies included: introduction of new revenue sources and

benchmarking of successful techniques, improving relations between the district and the tax

payers and sensitization of the public to comply on payment of revenue, The study recommend

that local government should sensitize the public on relevance ofpaying revenues using local

media, community meeting with local leaders and regularly carryout feasibility studies to map

the revenue viable sectors to support the efficiency of local revenue collection.

xfl

CHAPTER ONE

INTRODUCTION

1.0 Introduction

The research was a case study of Wakiso Municipal Council aiming to assess its performance

and challenges faced in implementing the strategies that enhance government revenue

collection.. This chapter consisted of background to the research problem, statement of the

problem, research objectives, research questions, and hypothesis. The chapter also described the

significance of the study, its scope, and definition of key term.

1.1 Background to the study

1.1.1 Historical Perspective

Adequate local revenues are critical in ensuring the viability and sustainability of local

authorities and the quality of services they provide to the community. In Uganda, local

authorities account form a significant share of government spending, and therefore are expected

to play a fundamental role in the implementation of national growth and poverty reduction

strategies. Local government Authorities (LGA5) in mainland Uganda for example account for

approximately one in every five shillings of public spending (Georgia State University, 2005).

The effectiveness of Local Government Authorities service provision relies on the adequacy and

buoyancy of local revenues, to support and sustain operations and maintenance of local

infrastructure. These LGAs are therefore supposed to rise their own revenues to supplement the

dwindling subvention from the central Government.

The decentralisation framework adapted by government in 1993, devolved responsibilities for

public services, planning and delivery to LGs. -e raison d’être for decentralisation was to

democratise society and involve the citizens to bring about good governance; improve and bring

services closer; reduce poverty and bring about sustainable development. Needless to say, from

the political perspective, decentralisation has allowed citizens to elect their leaders who are

directly accountable to them, thus increasing participatory democracy. On the technical side,

decentralisation has achieved little in allowing citizens to participate in planning, implementation

and monitoring and evaluation of the development activities in their localities. Due to reluctance

of the leadership to engage their communities; poor perception by the communities that policy

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processes are complex and that their participation is meaningless and contribution minimal —in

form of taxes- to the development process (Lukwago, 2009). Although Section 77 (1) of the

LGA 1997 (Ch 243) empowers LGs to formulate, approve and execute their budgets and plans

and to collect revenue and spend it, most LGs are unable to nance their budgets from locally

generated revenues. LGs face challenges in raising local revenues to support their development

needs. -ey largely depend on central government transfers which are conditional in nature

(earmarked by the Central Government for provision of specific services). -e conditions attached

to the CG transfers limit the LG discretionary powers to allocate the funds to their particular

local needs and to implement own priorities. Consequently, LGs tend to concentrate more on

managing CG funds, thus dedicating less time and attention to devise means of mobilizing

alternative sources of revenue. Attention on management of resources has also negatively

impacted on their efforts to deliver services since accountability is geared towards the funders

(CG and donors), but not the beneciaries (the local communities) (OXFAM, 2012).

It is important to note that local revenues can potentially provide a sustainable source of funding

for LGs to meet their development agenda. Local revenue mobilization empowers local people to

participate, own the development programmes and demand for effective delivery of services,

which improves people’s livelihoods. To achieve this, citizens, civil society, private sector,

media and LG officials need to be mobilised around local revenue generation and their capacity

to demand for accountability strengthened. Although local revenue can be used to meaningfully

supplement the grant transfers from the central to Local Governments (LGs), in order to support

service provision; there has been a decline in local revenue collections. -e performance of local

revenue is still constrained by low tax base; interference from politicians, poor coordination of

stakeholders, spontaneous division of LGs, insufficient support from CG, inadequacy of baseline

information (database) of potential tax payers, administrative weakness and poor utilization and

management of collected revenues, among others (SEATINI & OXFAM, 2013)

1.1.2 Theoretical perspective

The study was guided by the economic based theory proposed by Robert (1928) which states that

the rate of economic growth of a region is determined by amount of the increase in exports from

the region. Economic activities are grouped on the basis activities and the non-base activities.

2

As Craig Davis (2016) points out, there are a number of assumptions on which economic base

analysis is conducted. These include (1) that exports are the sole source of economic growth

(investment, government spending, and household consumption are ignored); (2) that the export

industry is homogeneous (i.e., that an increase or decrease of one export does not affect another);

(3) the constancy of the export/service ratio; (4) that there is no inter-regional feedback; and (5)

that there is a pooi of underutilized resources.

Robert Murray Haig in his work on the Regional Plan of New York in 1928. Briefly, it posits

that activities in an area divide into two categories: basic and non basic. Basic industries are

those exporting from the region and bringing wealth from outside, while non basic (or service5

industries support basic industries. Because of data problems it is not practical to study industry

output and trade flows to and from a region. As an alternative, the concepts of basic and non

basic are operationalized using employment data.

The basic industries of a region are identified by comparing employment in the region to national

norms. If the national norm for employment in, for example, Egyptian woodwind manufacturing

is 5 percent and the region’s employment is 8 percent, then 3 percent of the regions woodwind

employment is basic. Once basic employment is identified, the outlook for basic employment is

investigated sector by sector and projections made sector by sector. In turn, this permits the

projection of total employment in the region. Typically the basic/non basic employment ratio is

about 1:1. Extending by manipulation of data and comparisons, conjectures may be made about

population and income. This is a rough, serviceable procedure, and it remains in use today. It has

the advantage of being readily operationalized, fiddled with,, and understandable.

The economic base concept emerged in the 1920s, when economics focused on different

industrial strengths and economic techniques were not as nuanced. The exporting (basic)

activities were manufacturing and trade activities, and they could be readily identified in the data

series. One could think of changes in those activities as causing growth or decline.

Today, export activities purchase many services, and the comparative advantage of an area may

well lie in the services it produces. Peter Drucker (2017) imagines a world dominated by trade in

3

ideas and designs. There is little merchandise trade because technology permits small-scale

manufacturing. Such a world would change our ideas of what is considered basic.

The concept is that of a trading region, but in practice, economic base concepts are often applied

to areas that fit the concept. The Minnesota study cited above compared Minnesota to the US.

One can speak of the economic base of Saint Paul, Minneapolis, or Duluth, but to go on and

compare such areas using economic base techniques is not very meaningful.

Forecasting is a precursor to actions, and there is no explicit way to get from the economic base

to the kinds of actions most communities are interested in. That is, the economic base study does

not say what to do. Leaders say they want desirable economic activities like high-tech ones.

Indeed, we have seen studies of the transport needs of hightech industries, studies done prior to

investments to attract such industries (e.g., in Pennsylvania).

Even if one could make what-to-do linkages, the calculus of ‘desirable” is not simple. We

suppose that high pay, little environmental damage, upward mobility for workers, and stability or

growth are among the attributes desired of new activities. The table below gives information on

the pay attribute. Clearly, that attribute must be traded off against other attributes.

1.1.3 Conceptual perspective

In this study the independent variable was conceptualized as legal framework and the dependent

variable as local revenue generation. Legal framework was further conceptualized as a set of

constitutional, legislative, regulatory, jurisprudential and managerial rules that together

establish the voting rights citizens use to elect representatives. Beyond the selection of public

officials, citizens often use elections to accept or reject legislative bills, governmental decisions

and resolutions. Mahdavi (2008)

According to James (2006), A legal framework is a framework, set of rules, procedural steps, or

test, often established through precedent in the common law, through which judgments can be

determined in a given legal case. A doctrine comes about when a judge makes a ruling where a

process is outlined and applied, and allows for it to be equally applied to like cases. When

enough judges make use of the process, soon enough it becomes established as the de

facto method of deciding like situations. Countries differ in the organization of their territorial,

political and governmental systems, which affects the design of their electoral frameworks.

4

Similarly, the legal instruments and traditions upon which electoral frameworks rest, vary.

These factors greatly influence the design and revision of frameworks. The objective of this

Legal Framework Encyclopaedia topic is to analyze, from a comparative perspective, spe~ific

issues related to legal and administrative regulations which are fundamental for any election

which aspires to be free and fair. It aims to provide better understanding of what an electoral

legal framework is and can aspire to be, and how it can be reformed and improved.

Smith (2018) defines Local Government Authorities as administrative offices that are smaller

than a central government and are in direct contact with the community. The term is used to

contrast with offices at nation-state level, which are referred to as the central government or

national government. The pattern of LGAs is complex, with the distribution of functions varying

according to the local arrangements

1.1.4 Contextual perspective

In 1991, a Civil Service Reform programme was launched in Uganda. The programmes’

fundamental goal was to achieve a smaller, affordable, well compensated, efficient and

effectively performing civil service. One of the components in the programme was Local

Government Reform Agenda which aimed at decentralization of government functions,

responsibilities and resources to districts and strengthening of local authorities (Baker and

Wallevik, 2002) to improve delivery of services to the people. This was carried out through

devolution of authority, powers, responsibilities and resources from the central government to

local government authorities and five sectors that were managed by the central government was

decentralized health, education, agriculture, water and infrastructure.

In essence, the general objective of Local Government Reforms was to transform local

government organizations into organs that are autonomous, strong and effective, democratically

governed, deriving legitimacy from services to the people, fostering participatory development,

reflecting local demands and conditions, and lastly, conducting activities with transparency and

accountability (Mukandala and Peter, 2004). For this matter, The Constitution of the United

Republic of Uganda accords each Local Government Authority in Uganda (Mainland) the status

of government (URA, 2018). This means that the Local Government Authorities were given

5

powers, among other things, to collect taxes from different sources (Mponguliana, 2007). Each

local government or council can raise funds to meet their costs of delivering public goods and

services including financing development projects. Furthermore, a local government should also

have means of enforcing their decisions and resolutions relevant laws and by-laws (REPOA.

2004). The powers to levy and collect taxes, fees and charges are also authorized in the Local

Government Finances Act No. 9 of 1982 in which the local government authorities in Uganda

Mainland are required to levy taxes and other types of revenues, which will be sufficient for

meeting approved expenditure. This is a basic responsibility given by law to all Councils in

Uganda (URT, 1982). However, in 2003, there was an exercise of tax rationalization that

involved abolishment of development levy which was one of the key sources of local

government’s revenues. Following this rationalization, revenue collections among Local

Government Authorities (LGAs) were jeopardized (Fjeldstad, 2004).

According to Franzsen and Semboja (2004), prior to rationalization of taxes, 20 percent of LGAs

own revenues came from development levy. This was a flat head tax payable by adults over the

age of 18 (with women and the elderly exempted in some districts). This means that the abolition

of development levy caused a financing gap of about 20 percent. In other words, these changes

have significantly reduced local governments’ revenue collections, and reduced the role and

importance of local taxes in the overall intergovernmental fiscal financing.

In fact, there is significant need to expand local revenue collections in Uganda in such a way that

it becomes pro-poor and business friendly. In general, local taxes should reflect taxpayers’

ability to pay. This means tax payers with higher incomes or greater assets should bear a greater

share of the tax burden (World Bank, 2006). Until 2003, Ugandan local government taxation was

relatively permissive. This means that the local governments were given substantial latitude in

coming up with their own local revenue structure. This open approach to local revenues was a

major contributing factor to a highly fragmented local tax system. It was later discovered that the

fragmented local tax structure imposed a high burden on local taxpayers. This resulted in

rationalization and harmonization of local revenue systems. This system was implemented

through encouraging local government authorities to broaden their tax bases and keep Challenges

low. Analytically this was an imposed and forced top down rationalization of local revenue

6

sources that eliminated the development levy, abolished some fees, eliminated at least two types

of licenses fees, and abolished the local brew and livestock cess (Fjeldstad, 2006). These

measures meant that LGA’s were forced to look for alternative sources of revenue to cover the

financing gap so created. Thus, all Local Government Authorities were challenged to device and

implement strategies to enhance local revenue generationin order to cover the financing gap

created by the reforms.

1.2 Statement of the Research Problem

The deficit in budgets needed to be covered by central government enhancements and grants, so

that Local Government Authorities will be able to deliver service effectively to the local citizens.

Rural districts experienced fall in budget financing by 48 per cent and urban district experienced

a fall by 24 per cent. Another impact was the increase in intergovernmental transfer of funds to

finance deficits. In financial year 2015/16 intergovernmental transfers amounted to Ugshs. 179

billion but increased to Ugsh. 362 billion in 20 16/17.

Despite these efforts by central government, Local Government Authorities still experience

financing gaps which they must fill, if they are to remain effective in delivering services to their

citizens. This therefore, poses a key question about how Local Government Authorities’s have

been coping with this financing gap, specifically what strategies have they adopted to increase

revenue collections and what challenges have they faced in implementing such strategies. These

questions have motivated this study which was designed to investigate for the purpose of

identifying the strategies adopted and the challenges they have faced in implementing them.

1.3 Purpose of the Study

The purpose of the proposed study was to identify the relationship between legal framework and

local revenue generation a case of Wakiso Municipality Council.

1.4 Specific Objectives

Specific objectives were as follows:

i. To examine the nature of the local revenue sources existing in Wakiso District Local

Government.

7

ii. To analyze the trends of local revenues in Wakiso District Local Government in the last 4

years.

iii. To assess the factors affecting local revenue collection in Wakiso District Local

Government.

iv. To suggest possible ways of improving generation of local revenues by Wakiso Local

Government.

1.5 Research Questions

The study was guided by the following objectives:

i. What is the nature of the local revenue sources existing in Wakiso District Local

Government?

ii. What are the trends of local revenues in Wakiso District Local Government in the last 5

years?

iii. What are the factors affecting local revenue collection in Wakiso District Local

Government?

iv. What are the possible ways of improving accession and generation of local revenues by

Wakiso Local Government?

1.6 Research Hypothesis

This study was guided by the following hypothesis.

H01There are possible challenges towards the local revenue generation in the Local Government

H02: There are possible strategies towards local revenue generation in the local government

H03: There are affects in the local revenue generation caused by the general public awareness.

1.7 Scope of the study

1.7.1 Content scope

The study focused at examining the legal framework and the factors affecting sustainability of

revenue generation in Wakiso district local government. Specifically, the study looked at nature

of local revenue sources, trends and ways of improving revenue generation.

8

1.7.2 Geographical scope

The study focused on Wakiso Municipality Employees.

The study will be beneficial to policy makers of Wakiso district and other local government in

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

their performance.

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

carrying out research in the similar area.

The findings of this study are expected to contribute to the volume of available theoretical

knowledge in the subject area of Revenue collection. Likewise the study findings are expected to

act as a stepping stone to academicians who may wish to carryout research on the same and

related study to different case studies.

1.9 Operational definition of the key terms

Legal framework

A legal frame work according to Kemal, (2007) is abroad system of rules that governs and

regulates decision making agreements, laws e.t.c

Revenue

Revenue has been variously explained based on the context. For a company, this is the total

amount of money received by the company for goods or services provided during a certain tim~

period. It include all net sales, exchange of assets; interest and any other increase in owners’

equity and is calculated before any expenses are subtracted. (Jocks, 1998). In the case of

government revenue including the LGAs, it refers to the money collected from taxes, levies,

royalties, penalties loans, grant and dividends payments to the treasurer at the central or Local

Government Authorities.

9

Tax Administration

According to Gupta and Mookherjee (1998), tax administration comprises three interrelated

activities: the identification of tax liabilities based on existing tax legislations; the assessment of

taxes to determine if the taxes paid are actually within tax liabilities; and the collection,

prosecution, and penalty activities that impose sanctions on tax evaders and ensure that taxes and

penalties due from the tax payers are actually collected.

10

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This Chapter covered the theoretical review, conceptual review, review of related literature,

empirical review and research gaps based on the objectives of the study.

2.1 Theoretical Literature Review

Plowright (2011) argue that a literature review gives the researcher theoretical perspective to

guide his thinking about exactly what it is being investigated. The review here covers both

theoretical and empirical review on government’s local revenue generationstrategies and

challenges. In the theoretical review, models and theories guiding local revenue generationare

described.

2.1.1 LGAs in Uganda

In Uganda Local Government units consist of four major types; City, Municipality, Township

and District Local Authorities. There are currently 132 Local Authorities, consisting of four city

councils, Fifteen Municipalities, Mine Township and ninety nine Councils (Dryden, 1968).Local

Authorities were established in Uganda since precolonial period, the colonial era, and the period

after independence. The ongoing Local Government Reform process dominates the period after

1998 (Ngwilizi, 2002). These are given mandate to collect and spend revenue from specified

sources. Strategies for such collection varies from one LGA to another.

2.1.2 Models for Local revenue generation

A revenue model is a framework for generating revenues. It identifies which revenue source to

pursue, what value to offer, how to price and who pays for the value (Afuah, 2004). It is a key

component of in organization business model (Wagner, 2013). It primarily identifies what

product or service will be created in order to generate revenues and the ways in which the

product or service will be sold. Without a well-defined Strategies including revenue model, that

is, a clear plan of how to generate revenues, organization will more likely struggle due to not

meeting targets to sustain it mission. By having a clear revenue model, a business can focus on a

target audience, fund development plans for a product or service, establish marketing plans,

11

begin a line of credit and raise capital (Grant, 2010) Government local revenue generationmodels

are several but major ones are Social economic, psychological and Gordon-Li models.. These

models provide theoretical implications with regard to revenue payments and collections.

(i)The social economic model

The social economic model is further divided into two: sociological and economic models. All of

these models provide analysis with regard to passiveness of people to pay levies and handles

which are faced by revenue collectors. Sociological models is based on explanations on the

influence of social factors to people on~paying levies. According to Hans (2000), the society is

dominated by different people and that results on the practice of different behavior and

perceptions on various intuitions’ laws such as revenue collection. Levies and other taxes would

be optimal where the society leaders are transparent and community needs are well consider. The

model insists on the importance of cleanliness of the society leader and in this case, their

transparency in paying taxes is a mirror to other people in the society and hence positive

perception on the revenue collection. Thus in the model it is stipulated that if the society leaders

are promptly paying levies everyone in the society will pay because of fear of social

commitment. The contents in the model are important to the local government leader and the

entire management that before enforcing laws and by- laws during local revenue generationthey

should first ensures that they are paying all revenues which they are supposed to pay at the right

time. This will have positive implication to the tax payers since it will act as a binding force and

the community builds up the habit of paying taxes / levies. The Local Government eventually

realize optimal revenues and thus, they will be able to implement all socio-economic

development plans stipulated in their budget (Anderson and Poole, 2004),

In the economic model, the assumption is that human behavior underlies economic and that

influence the evaluation of the costs and benefit of the given business or income. The pioneers in

this model argue that people refuse to pay taxes! levies when the uses are not vivid (Stewart et

al,, 1989. The misuse of collected revenue is the core cause of what is called levy ‘invasion’ in

the business industry. The model is important to the Local Authorities since it stresses on the

effective use of collected to the revenue for the development of the local authority (Stewart et al,,

1989). This can only be achieved where sabotage, embezzlement, misappropriation, misuses and

12

finding of the funds is eliminated.

(ii) Fiscal Psychology model

Fiscal psychology model blend together aspects of economic deterrence models and social

psychology models. The essential thrust of this approach is that individuals are not simply

independent utility maximizes rather individuals are recognized to contain an array of attitudes

and beliefs which interact and respond to social norms Alm et al. (1995), Pilkington (1998).

Carnes and Eglebrecht (1995). Roth and Scholz (1989). Hasseldine (2000).

Social psychology models inductively examine the attitudes and beliefs of taxpayers in order to

understand and predict human behavior. This concept is based on the assumption that taxpayers

have separate views with respect to looking after their self- interest as opposed to contributing to

community interests. In this regard, the more positive a taxpayer’s attitude towards paying tax

and working with the tax authorities, the greater their willingness to pay tax. Schrnolders (1960)

Further to this, Strumpe (1960)asserted that rigid enforcement (rigidity of assessment)by the tax

authorities is likely to reduce taxpayers’ level of compliance with the tax laws. The two main

variables in the model, the “rigidity of assessment” which measures the amount of tax fines, the

assessment process and the level of “red tape” involved in dealing with the tax authorities and,

secondly, the “willingness to co-operate” which relates to individuals’ attitudes and perception of

the tax system are critical to revenue collection. The concept of “willingness to co-operate” as

being positively related to compliance, in that taxpayers who are very co-operative towards the

tax authority are likely to be more compliant than those who are not.

2.1.3 Theory guiding revenue collection

i. Economic Based Theory

They are also known as deterrence theory and they place emphasis on incentives. The first and

well known theory of economics suggests that “taxpayers are amoral utility maximizes, - they

are influenced by economic motives such as profit maximization and probability of detection”.

As such they analyze alternative compliance paths for instance whether or not to evade tax, the

likelihood of being detected and the resulting repercussions and then select the alternative that

13

maximizes their expected after tax returns after adjusting for risk. This process is referred to by

Trivedi and Shehata (2005) as “playing the audit lottery”. Therefore according to the theory, in

order to improve compliance, audits and penalties for noncompliance should be put in force.

ii. Psychology Theory Psychology theories on the other hand posit that taxpayers are influenced

to comply with their tax obligations by psychological factors. They focus on the taxpayers’

morals and ethics. The theories suggest that a taxpayer may comply even when the probability of

detection is low. As opposed to the economic theories that emphasize increased audits and

penalties as solutions to compliance issues, psychology theories lay emphasis on changing

individual attitudes towards tax or revenue systems (Chaudhry, 2010). This calls for efforts on

awareness creation and inculcate the tax pay habit to the tax payers.

2.2 Conceptual review

2.2.1 Conceptual Framework

Conceptual Framework for challenges facing Local Government Authorities towards

implementation of strategies to enhance revenue collection

C)

14

Figure 1: Conceptual Framework

INDEPENDENT VARIABLES DEPENDENT VARIABLE

LEGAL FRAMEWORKo Constitution, _________________________________________• legislation,• Policy, Local Revenue Generationo Regulations and contracts.

IN~] ERMEDIARY VARIABLES

LOCAL GOVERNMENTAUTHORITIES STRATEGIES

Bylaws

Source: Adopted from Kiabel, and Nwokah,. (2009) “Boosting Revenue Generation by State

Governments in Nigeria: The Tax Consultant Option Revisited”. European journal of sciences,

vol. 8, no 4 and modified by the researcher.

This study is focusing on the gaps that exist between LGA’s budgets and local revenue

generation and examine the challenges faced by Local Government Authorities in implementing

new measures (strategies) to be taken to enhance revenue collection. The above conceptual

framework provides an example of a modal to be adopted to enhance revenue collection. It is an

ideal standard to see that any local revenue generation system should have good policies and

regulations. Without good policies and regulations the targets cannot be reached and the system

will not be effective. Policies and regulations helps to guide revenue collections and taxpayers

will be willing to pay tax provided that they understand policies. The appropriate model for

15

evaluating challenges faced by LGA in implementing strategies to enhance revenues found to

involve two variables, that is dependent(Local revenue generation challenges) and independent

variables (LGA factors). The model works through the way tax payers perceive those factors. If

taxpayers perceive that the tax system is equitable tax compliance will be high. If corruption is

eliminated tax payers will willingly pay taxes. If choice of tax collectors is fairly the amount

collected will be high. If bylaws are reviewed and punishment is fairly administered tax payers

will voluntarily pay taxes. They should also place a well-designed mechanism to reach all

possible tax payers and develop good local revenue alternatives.

This theory is applicable to this study because it mentioned the importance of having local

government close to the people. It also spell out that it is the responsibility of the local

government to provide social services through taxpayers money. But local revenue generationis

not easy, it require good management and creativity.

2.2 Conceptual Review

2.2.1 Revenue

Revenue is a result of planned target through budgets whereby the estimated revenues are

involved in the budget, which highlights that the cash budget consists of the estimates of cash

receipts and cash payments arising from the planned levels of activities and use of resources

which are considered in the various budget (Fosu and Ashiagbor, 2012). The cash budget is a

complete survey of the financial implication of expenditure plans of both a current and capital

during the year. Moreover, by comparing the anticipated outflows of cash with the expected

inflows, the cash budget enables management to anticipafe any deficits so that the necessary

financing arrangement may be made, and to decide upon a policy for placing cash surplus (Fosu

& Ashiagbor, 2012).

2.2.2 Revenue Generation in Local Governments

Article 176(2) (d) of the Constitution provides for the establishment in each local government

unit a sound financial base with reliable sources of revenue in order to deliver on their mandate.

LGs will continue to be one of the prime institutional movers of development in Uganda and

their importance and impact on the daily life of citizens cannot be over-emphasized. The

16

standard of living of Ugandans either in rural or urban areas are inevitably affected by local

government activities through the provision or non- provision of basic services such as water

supply, roads, health and educational services. Financing for LGs therefore remains the most

critical policy issue in local government administration in Uganda. Owing to the development

responsibilities placed on local governments; there is need for adequate financing for this level of

government (The 1995 Constitution of Uganda).

The allocation of Unconditional grant to LGs is not undertaken in accordance with the formulae

prescribed under Article 193 (2) of the constitution. Consequently, the allocations have not

enabled LGs to adequately finance their local discretionary priority needs or cater for the general

price changes and the incremental costs of running services. The allocation of Conditional grants

to the Local Government by the sector is not in accordance with the formulae agreed upon with

LGs and the Local Government Finance Commission (LGFC). Consequently, Local

governments have not had the expected increments in conditional grants to match the increase in

the cost of delivering services in LGs and the growing needs (The 1995 Constitution of Uganda).

However, despite the formulation of the articles and give financial autonomy of local

government to finance their development activities, there is widespread concern that LG

financing is not sufficient to meet the level of demand for service delivery. The 7th Joint Annual

Review of Decentralization report 2012, noted that whereas transfers were increasing in nominal

terms, the trend in the key service sectors of education, health, water and roads was declining

and negatively affecting services in LGs (Ndyamuhaki, 2013).

2.3 Review of related literature

2.3.1 The nature of the local revenue sources existing in Local Governments

2.3.1.1 Revenue Sources

Intergovernmental Transfers

Aiko & Logan, (2014) assert that 36 percent of local government general revenue are mainly

intergovernmental transfers from other levels of government, 32 percent came from state

governments (including indirect local government funds), and 4 percent came directly from the

local government. Local governments include county governments, municipalities, townships,

special districts (such as water and sewage authorities), and school districts. Aid to school

17

districts account for more than half of all state government transfers to localities. Housing

programs make up 40 percent of federal transfers to local governments.

Own-Source Revenue

Local revenues also have their own sources of revenues such as taxes from garbage collection,

markets and parking which facilitate them in the financing of local activities. Other sources of

own-source revenues for the local government may include charges and miscellaneous fees, such

as water, sewerage, and parking meter fees collected by municipal or county governments

(Sihag, 2009).

Taxes on real property (land and improvements) Local governments also gain local revenues

from the taxes of properties and this include property value taxes and parcel taxes, as well as

grants in lieu of taxes (neither the federal or provincial governments pay property taxes directly,

but each pays grants in lieu of taxes on some of their properties) (Sabaini & Jimenez, 2012).

Fees and charges for services: The fees and other charges levied from the services of the local

government to the local and foreign people also serves as another source of local government

revenues. Petrovsky (2014) assert that local government coerces entrepreneur to pay market fees

since it is attached to their daily income activities. This include things such as fees for use of

local government facilities, fees for services such as water or sewer, and fees in relation to

various regulatory activities, such as inspection and permitting (Avellaneda, 2013).

Development services Another source of local revenues, for the local governments are th~

charges obtained from development services. There are charges to support the cost of

infrastructure needed to service future development and include development cost charges,

latecomer agreements, development works agreements, and parkiand acquisition charges (Odd

Heldge Fieldstad, 2004).

Transfers or grants from other governments, which include both conditional and

unconditional grants. Conditional transfers are payments to local governments that are restricted

in some way, generally with respect to the use of the funding (e.g., funding must be used towards

a specific project or program). Mama (2013) conjure that the over dependence of local

18

government on central government transfers delays immediate financing of activities and always

conditional, however, there are unconditional transfers which do not have such restrictions, and

local governments may choose where the funding will be used.

Utility charges (Local Government Regulation 2012, sections 99 to 102) Local governments

may make and levy utility charges to cover the costs of providing the following services: waste

management, gas, water, sewerage. A local government may also levy a utility charge on any

land it provides a service to, whether or not the land is ratable. However, the amount of a utility

charge must relate to the costs of providing the service by the local government. In particular, a

utility charge for a water service must be charged by either measuring consumption through a

water meter or by estimating the water consumption (Carroll and Johnson, 2010).

Charges for services or facilities (Local Government Act 2009, section 262(3)(c)) A local

government may charge for a service or a facility it provides. This is a broad power, and a local

government may wish to use this to generate own source revenue to fund council operations or

the provision of services. The local government may charge for the facilities and services it

provides to anyone wishing to purchase them on a purely contractual basis. In doing so the

council will reduce the level of revenue required to be generated from ratepayers. An example

would be the hiring of a council hall or an item of plant and equipment to a community resident

(Keen, 2012).

Fees

Cost-recovery fees for statutory services (Local Government Act 2009, sections 97to 98) A local

government has the power to fix a cost-recovery fee by resolution of council or under a local

law. The fees are for particular statutory services’ including: application fees for the issue or

renewal of a license permit, registration or approval under a Local Government Act’ (defined in

schedule 4 of the Local Government Act 2009) seizing property or animals under a Local

Government Act’ performance of another responsibility imposed on a local government under

the Building Act 1975 or the Plumbing and Drainage Act 2002.

19

A cost-recovery fee must not be more than the cost of providing the service or taking the action

for which the fee is charged, with the exception of those matters identified in section 97(5) of the

Local Government Act 2009. Each local government must keep a register of its cost-recovery

fees (Local Government Act 2009, section 98). The register must state the paragraph of section

97(2) of the Local Government Act 2009 under which the cost-recovery fee is fixed and the

provision of a Local Government Act or the Building Act 1975 or the Plumbing and Drainage

Act 2002, for the various fees. These fees are usually adopted by the council as a part of its

annual budget meeting; they can, however, be amended during the year by resolution if the

council so decides. A local government must keep a register of these fees and the register must

be open to inspection as defined in section 98 of the Local Government Act 2009.

Commercial revenue from business activities Local governments may derive revenue from

various business activities such as property development, caravan parks and pastoral operations.

In general, the conduct of these enterprises is governed by the local government principles

outlined in section 4(2) of the Local Goyernment Act 2009 and the financial sustainability

criteria (in particular the sound contracting principles) outlined in section 104 of the Local

Government Act 2009. A robust business case is essential when considering new business

activities. Under section 41 of the Local Government Act 2009, a local government’s annual

report must contain a list of all the beneficial enterprises conducted by the local government

during the financial year.

2.3.1.2 Collection of Local Revenues

Revenue collection refers to obtaining cash from tax payers previously assessed. Revenue

collection is one of the key activities in local government, MOLG publication, (2003) LGA,

1997, section 78(4) provides that the local government annual budgets shall reflect all revenues

to be collected or received by the local government for each financial year. Section 79, states that

local government revenues shall be regulated as provided for in the fifth schedule. These legal

provisions directly or indirectly provide certain people and institutions with roles and

responsibilities to monitor local revenue collection in LG’s such as council, C.A.O and R.D.C.

Chief Finance Officer however, is empowered to monitor in order to ensure that the revenue

collectors carryout their duties property and that all revenue due to local governments is

20

collected promptly. However, section 86 of the local government Act 1997 provides that in the

districts (urban) the revenue is to be collected by Town councils. According to Musgrave (1993),

argues that assessment and collection of taxes requires personnel and equipment. This activity

provides an important public service and it should be provided efficiently. He further argued that,

—it is important to examine the effectiveness of tax system with regard to how much revenue is

actually collected per unit cost, since costs rise with every function implemented.

2.3.1.3 Enforcement

Odd-Heldge Fieldstad (2004) asserts that enforcement involves using task force comprising of

parish chiefs, revenue officers and enforcement officer to collect the tax from defaulter. In case

tax payer fails to pay the tax, they deliberate actions to ensure recovery of the tax, also referred

to as enforcement measures are implemented, these include among others. Veron (2012) argued

that business owners are ease to coerce for tax payments other than individuals, which

necessitates effective collection of market dues through the tender and license.

Reminder notice The tax payers are remained of his/her obligation to pay before further actions

are taken. Generalities of tax revenue which revenue is used for service delivery.

Sealing The tax payer’s commercial premises may be sealed off until the tax and payer responds.

Court order The tax payer may be taken to court for failure to pay tax and payer responds.

Distrait According to (sec. 108 IAT, 1997/8) the tax payers known moveable property is seized

and auctioned and the proceeds go to settling the auctione~rs costs, tax authority dues and the

balance if any to the tax payer. Enforcement is a very crucial tool of tax administration because

once it’s lacking or ineffective then it renders the aspect of penalties useless as there will be no

force/power to ensure compliance.

According to Behiigwa (2004), Flat rates taxes are regressive in character. When market dues are

set, the flat rate imposed on a small quantity of produce is relatively high compared to the flat

rate imposed on a product, and then this will hit the poor who can only sell small quantities

21

harder than the better off who are able to bring to market greater quantities. In addition flat rate

business licenses will take a relatively bugger share of net income of small or micro enterprises.

In Uganda practices in tendering private contracts for the right to collect taxes vary a cross

district administration (USAID, 2003, LGFC 2003). A wide spread feature is that market places,

landing sites and parishes are tendered out on the basis of reserve price, based on an assessment

of the revenue potential of the individual market or site.

According to fifth schedule, local government authority (1997), clearly spells and list the

following as various types and sources of local government revenue; property tax, graduated tax

(currently suspended and not considered there). Other revenue comprises of fees and fines,

market dues, parking fees, bicycles licenses, boda-boda cyclist license and permits in respect of

cyclist’s licenses, and permits in respect of any service rendered interest in investments, charcoal

licenses. However, some of the above are sometimes referred to as non-tax revenue sources

because they have any element of quid. Tayebwa (1998) opine that tax has quid-quo element

which must be considered very carefully in local government, if tax payers are to be won over to

comply. As highlighted by bird (1998), administrative aspect of taxation is over whelming

important as it is the force that gives momentum to policies.

The trend of local revenues in Local Governments

Okon (1997) states that use of enforcement in revenue collections leads to tax

payers’compliance, which increases local revenue collections. Local Government enforcement

department at the district facilitates forced compliance to tax payment due to the fear of penalties

attached to non-compliance. Tax is regarded as a tool of fiscal policy used by government all

over the world to influence positively or negatively particular type of economic activities in

order to achieve desired objectives. The primary economic goals of developing countries are to

increase the rate of economic growth and hence per capita income, which leads to a higher

standard of living. Progressive tax rate can be employed to achieve equitable distribution of

resources. Government can also increase or decrease the rates of tax, increase or decrease the

rate of capital allowances (given in lieu of depreciation) to encourage or discourage certain

industries (e.g. in the area of agriculture, manufacturing or construction) or may give tax

22

holidays to pioneer companies. Income tax therefore can be used as an agent of social change if

employed as a creative force in economic planning and development.

Laffer (2015) argues that involvement of taxpayers in planning for local revenue collection

accelerates increase in revenue collections. The awareness of taxpayers about the rationale of

compliance to tax facilitates increase in revenue collections. However, low rate assessment of

local taxes facilitates increase on tax payments than high rates. The economic effect however

recognized the positive impact that lower tax rate have on work, output and employment and

thereby the tax rate base used in providing incentives to increase these activities whereas raising

tax rates here the opposite economic effect is used by penalizing participation in the taxed

activities. At a very high tax rate, negative economic effect dominates positive arithmetic effect,

thereby, the tax revenue declines (Islahi, 2006).

Orewa (2015) argues that, if people are satisfied that government is doing its utmost to raise

standards of living of masses and in maintaining prestige of country facilitate increase in revenue

collections. The taxes should be easy, economical and convenient to administer that is the cost of

collecting to the tax authority and the cost of compliance to the tax payer should be as low as

possible and should be consistent with effective enforcement which means that the purpose and

manner of payment of the taxes should be related to the habits of the community. Hence the

colonialists were careful enough to introduce taxes as closely connected as possible to what their

native laws had been paying to their chiefs in those areas where such was the practice.

Balls (2015) pointed out that subject to the direction of the government and the will of the

legislature, the purpose of the tax administrator is, to devise taxes in conformity with the

principles that will raise revenues sufficient to meet the needs of government to establish the

basis of assessment and a procedure for collection that are as simple, effective and economical as

possible, and to develop auditing and other procedures to increase local revenue collections. The

function of a tax administrator also includes ensuring full compliance and effective enforcement

of tax matters by tax payers.

23

The factors affecting local revenue collection in Local Governments

Revenue collection rates and bylaws As per Local Government Finance Act, powers local

authorities to establish administrative and financial bylaws. Financial bylaws set local taxes to be

charged and collected from own sources of revenue, fees, charges and fines from misconduct of

local authority bylaws. The low rate of taxes results in low revenue collection whereas a review

of those bylaws to increase rate at least after five years will strengthen revenue collection

(Carroll and Johnson, 2010).

Weather condition It is observed that either good or bad climatic condition has a direct effect on

revenue collection because main revenue source like produce (cash or food crop) depends on

climatic conditions. As for example high revenue collection result from high harvesting of cash

and food crops where rates are charged on crops ferried outside the local authority boundaries.

This variable tested the relationship with outcome variable (Atan, Abdul Raman, Sawiran,

Mohamed and Mail, 2010).

Revenue outsourcing The Government of Uganda is committed to increase the participation of

the private and third sector in the delivery of public services. In line with this, and as part of

Public Private Partnerships (PPPs), the Councils outsourced their revenue sources to the private

collecting agents. Notwithstanding the fact that most of the revenue contracts are benefiting

collecting agents more than the Councils (CAG, 201 1), majority of the collecting agents

normally fail to remit the collected amounts to the Councils.

Revenue Performance This factor observed to determine the effect of independent variables

explained above. The four independent variables, that is, low revenue collection rates, effects of

weather condition, ineffective implementation of bylaws and revenue outsourcing were tested for

relationship with a dependent variable revenue performance. The local government authorities

main own sources are Local taxes, fees and fines, business license and permits and revenue

exchange transactions. Further, Okello (2011) assert that shop operators, market vendors and

general business are the most compliant category of tax payers since they businesses are the sole

source of income for survival and tax compliance strengthen their reputation.

24

Fare levels The fare levels or structure influence the average fare collected per passenger and, in

turn, the overall fare revenue collected. By increasing the fares (or reducing the discounts) set for

each of the rider categories, fare revenue can be increased. Similarly, reductions in fares resulted

in a net loss of revenues. Changes in the fare structure also impact riders, with increased fares

reducing ridership and reduced fares increasing ridership. Given this, fare adjustments should be

made with consideration to transit customers affected (Mama, 2013).

Productivity

The productivity of transit service is typically measured in terms of ridership per mile or hour of

service. Transit systems like Votran typically attempt to balance the obligation to maximize route

productivity with service policies aimed at developing new markets, serving remote communities

or accommodating disadvantaged populations. Decisions regarding route productivity should be

made with consideration to social needs of the community and the transit customers affected

(Carroll and Johnson, 2010).

Efficiency Operational costs (fuel, labor, scheduling) are partly within control of Votran and

partly a result of prevailing economic conditions. Cost efficiencies are achieved through careful

budgeting, monitoring and controlling of expenditures. Cost efficiencies can be measured by

operating cost per hour. Adam Smith (1776) recommend that equity, certainty, convenience and

efficiency as the mechanism to influence tax payments.

Identifying Source of Revenue All governments face political, legal and economic realities

which constrain their efforts to draw resource from their communities. The extent to which the

economic base can be tapped by a government within these constraints is the organization’s

revenue capacity, often referred to as fiscal capacity (Finkler, 2005,). Revenue management is a

process of identifying and analyzing sources and amounts of government revenues such as taxes,

income from natural resources, loans and grants, and Assessing the fairness and efficiency of

revenue generation. According to Tanzi (2000) people’s tax payment should be in line with their

income and they are required to pay a tax in proportion to their level of income on the other part

of tax collectors, collection of revenue should be time conscious and convenient and the cost of

collecting the taxes should not be high to discourage business. Furthermore, Finkler (2005)

25

argues that absence of fair assessment as applicable in the law leads to non-compliance to tax

payments which adversely affect the performance of sectors in local government. Such as for

example, the systems of taxation and the management of natural resources. Together with public

revenue reporting, monitoring of public revenue acts complementary to monitoring public

budgets, and tracking what the government does with that revenue. It allows citizens and civil

society to question how governments mobilize financial resources and how those resources are

utilized.

Collection Methods

Collection method affects collecting monies owed in a variety of forms, such as coin and local

currency, paper checks, credit card charges, an automated clearing house. Each form of the

collection has its own merits. For example, if we take, receiving revenue in the form of coin and

currency, it allows government to use the revenue immediately in order to meet its financial

needs without any additional cost (Shah, 2007). The other form of collection methods incurs

costs as compared with coin and currency. For example, receiving revenue in the form of paper

checks the most common means of paying obligations of local government typically accepts

checks over the counter and by mail. Checks should be deposited in the bank the same day they

are received. Depositing checks the day they are received helps to expedite the availability of

funds by getting the checkers into the Federal Reserve payment system as quicldy as possible.

Carroll and Johnson (2010) conjure that poor revenue management adversely affect tax payers’

compliance to payment of local taxes in local government.

Accuracy and Time Lines of Reporting One of the most important components of any revenue

collection system is accurate and timely reporting. Local governments need revenue management

software that allows revenue collection staff to update records frequently. According to

ERCA(2008) as cited by Mukhtar (2014) revenue accounting involves timely recording of

collection, recording payments to individual tax payer’s files to appropriate accounts, reports and

review the accuracy of regulatory information. Revenue accounting facilitates refunds, bank

reconciliation, and revenue sharing between regional and federal government (Keen, 2012).

26

Tax Base Tax revenue can be increased by increasing the tax base which means including or

redefining previously exempted tax. A different choice of assessment methods can increase the

assessed value to collect more taxes (Wong, 2006). This is done when the increase in tax rate is

not enough to cover the budget gap.

Tax Rate

Tax rate also affects revenue collection. The increase in taN rate has positive impact on revenue

collection, as a result, local property tax rates changes often.Nevertheless, if there is a large

revenue shortage, and small incremental adjustment of the tax rate may not be enough. As a

result, developing new taxes is need (Wong, 2006).According to Giugle and Webb (2000), sub

national governments must have adequate revenue to cover their spending not only changing tax

rates but also imposing new taxes. All of the listed are major factors that affect revenue

collection either positively or negatively. Effective revenue management will capitalize positive

factors and mitigate negative factors.

Types of tax Revenue is affected by types of bases and its administration nature (Mikesell,

2003). Some taxes can easily be collected, some are difficult or require high effort.

Procedures if revenue enforcement procedure not properly implemented and revenue evaders

are not strictly controlled to pay their tax as per the schedule, this is accompanied with due to

lack of clear guidelines and inadequate management system (Atan, et al, 2010).

Attitude Revenue collection is also impeded by public attitudes towards public revenue (Yousuf,

20 12). if public attitude towards public revenue is positive it will have positive impact on

revenue collection. If attitudes towards public revenue are negative the impact on revenue

collection will be negative from.

Compliance Handling An effective and efficient program of taxpayer service activities is a

critical objective of all revenue bodies. It helps for saving cost of revenue collection and will

help reducing the gap between what taxes should be collected and what is actually collected

27

(Carroll and Johnson, 2010). Schedol (2011) argues that incompetent revenue assessors leads to

taxpayers’ non- compliance in local government.

Mechanisms for identification and registration of taxpayers;

taxpayer’s recognition and registration is a foundation for other tax administration for tasks,

according to (Bird and Zolt, 2004), it should establish a system to register non voluntarily

taxpayers~ registration function of tax administration organization absorbs finding out potential

taxpayers for tax objectives and registering them as taxpayers in a central data base. A good tax

administration identifies and registers all traders who are liable to register for the tax, according

to article 43 of the income tax proclamation,N Every person having a taxpayer identification

number (TIN), but in no case may a person obtain more than one TIN.

The possible ways of improving generation of local revenues by Local Governments.

Widening the town’s revenue sources base

Budget scarcity of the town admiflistration is due to low level of revenue collection. This low

level of revenue collection is also the result of weakness in assessing the revenue bases, finding

new base and exploiting them exhaustively. Therefore, the town administration should carefully

assess and find new revenue sources and exhaustively exploit the existing revenue sources by

implementing revenue rules, regulations and procedures (Mama, 2013). Bird and Zolt (2004)

assert that training of revenue collectors and assessors wid~n tax bases which increase revenue

collections.

Improve planning and implementing capacity Poor planning has an adverse effect on the

town’s achievement of development activities like assessment and collection of allowable town

revenue. Hence, planning system should be improved in a way that can forecast future actions

properly. Moreover, the implementing capacity must be developed through provision of

appropriate and sustained training to the staff of the town administration to increase their

commitment and fill skill gap (Carroll and Johnson, 2010).

Establishing adequate data base systems As data obtained in the field work revealed, the town

administration has not exercised an organized data base management. As a result, revenue

28

planned and actually collected had shown large deviation from year to year. Therefore, by

improving the data base management, the town administration should smooth the progress of its

revenue collection hence promote revenue management (Atan, et al, 2010).

Raising Continuous awareness for taxpayers To reduce the number of illegal traders and non-

registered taxpayers and increase revenue, one of the important tasks to be done is providing

organized information to the taxpayers as to why the payer is charged. This enables the taxpayers

to link the relationship between tax obligations and town service delivery. Taking this fact in to

consideration, the town administration should design and implement awareness creation program

for the residents of the town in general, taxpayers in particular (Carroll and Johnson, 2010).

Furthermore Atan (2010) assert that failure to raise awareness to pay takes contribute to delayed

tax payments in local government.

Institutionalizing standard accounting system that produces timely and reliable

information. One of the tools in Public Finance Management to manage revenue is performance

reporting in a timely and reliable manner. The accounting systems used by the town are not fully

computerized that it could provide up to date and clear financial information. Hence, improved

accounting system should be designed and implemented so that comprehensive financial reports

can be produced and used for decision making (Keen, 2012)’. Furthermore, Yousuf (2012) argue~

that benchmarking of international successful tax system facilitates compliance to revenue

collections.

Encouraging community participation in planning and resource collection There should be

active participation of the residents in needs identification, planning and implementation process.

This could help in promoting transparent and participatory decision making. In Contrast, other

town administration encourages the participation of community in development activities of the

town. Therefore, the town such as planning and increasing revenue collection plan administration

should promote community participation during planning and implementation process through

the use of full council meetings (Atan, et al, 2010).

29

A need for designing the reward system

There should be an implementation of integrated performance management system in order to

reward employees according to their performance in order to boost their commitment. This helps

town administration capable of retaining competent staff as well as attracting new ones to fill

vacant positions (Keen, 2012).

2.4 Empirical review

Cash budget is an indication for the revenue to be received, but if they are not collected the

budget remained to be a dream. In any organization there must be the revenue collectors. In the

case of Local governments they have special systems of revenues collection. According to

Fjelstad, (2004) local government tax collection is the responsibility of the council staff and is

completely separated from revenue collectors to the central government.

Fjelstad, (2004) goes on by saying in practice; the organization of tax collection varies between

councils. In addition Fjelstad, (2004) argued that identification of more revenue sources,

sensitization of taxpayers, acquisition of motorcycles for revenue collection, training, quarterly

performance review on revenue collection, establishing revenue enhancement committee for the

town council, ensure regular meetings for the revenue enhancement committee, establishing

revenue information management system, embark on vigorous tax education campaign to create

awareness are viable strategies to effectively collect local revenues. For instance, in some

council the village level has been excluded from collection, and the task is taken over by the

ward level. This is due to incentive problems connected with tax collection at the village level. In

most cases councils have introduced new methods to increase revenues from existing sources by

outsourcing some of the revenue collection to private collectors to increase revenues from

existing sources.

In accordance with numbers prior empirical studies of local public finance, Zafra et al., (2009)

and Guilaamon, et al., (2011), to examine, exclusively Muleba District Council with relatively a

population of 280 people. In order for the local government to plan and collect exact reasonable

revenue in its area of jurisdiction it must seek and compile information of all income generating

entities including the business operators as it is insisted by. Glautier (1991) that to a greater or

30

lesser degree, all Western governments intervene in the activities of business organization in the

process of managing what is known as a _mixed economy’, that is, an economic system

consisting of both state — controlled and privately ‘controlled business organizations:

Government’s agencies, such as central statistical services, ministries of commerce, industry and

employment, collect information about the various aspects of the activities of business

organizations. Much of this information is a direct output of the accounting system, for example,

levels of sales, proportion of profits, investments, stocks, liquidity, dividends levels, proportion

of profits absorbed by taxation. This information is very important in evolving policies in

managing economy.

TGNP, (2006) comments that in spite of the increased contribution made by excise taxes, income

tax and VAT remained the top sources of revenue. The government to adopt a more progressive

income tax structure, one which taxes the wealth, reduces the relative on the salaried middle-

class including teachers, health worker and the like, and does not tax the poor. VAT tax regimes

also need to be reviewed to ensure that they are calling for a removal of all taxes on kerosene,

and arguing that the abolition of taxes for airplane fuel benefited the government leaders and the

wealthy, not the poor.

2.5 Research gaps

The government’s plans to enhance financial accountability, including the tracking of

expenditure at local government level, and the call for district councils to report revenue and

expenditures to the public on a monthly basis. This was fruitful if there is an increase in the

number of civil society organizations that are involved in budget analysis and expenditure

tracking at the community, district, and national level, and they are welcomed in their endeavors,

including the media themselves, the government needs to institutionalize CSO involvement more

systematically at all levels, beginning at the village and district level (TGNP, 2006).

31

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter described the research methodology which were used in this study. It provided a

blue print to be adopted in the study under the following parts namely; research design; study

area; population and sample size; sampling techniques; data collection methods, data analysis

techniques. It also provided description of the validity and reliability issues as well as ethical

considerations of the research.

3.2 Area of study

This study was conducted in Wakiso Municipality, Wakiso District in Uganda mainland.

The reason for choosing this area was that it is accessible to the researcher and was easy to get

the information needed in data collection given the financial and time constrains. Also the

Wakiso Municipality was one of the busy municipalities in Uganda with famous trade centers

where by various economic activities are being carried out and one of the fastest growing towns

in central Regions in Uganda that should have functional and effective local revenue generation

strategies.

3.2 Research Approaches

Qualitative and quantitative research approaches was used during the data collection.

Data collection through employment of qualitative approach incorporated: sources of revenue,

problems during local revenue generationand strategies employed during local revenue

generationor tax collection. Quantitative research approach was used to collect proved data such

as the amount approved to be collected and actual amount of revenue collected in a period of five

years. Quantitative approach facilitated evaluation of the nonmeasurable characters. The use of

both qualitative and quantitative approaches was used because it enables bridging each other as

there is no research which is pure quantitative, Taking both approaches on board enabled the

researcher to benefit from conversations with respondents through interviews (qualitative) and

the reward of numbers (quantitative).

32

3.3 Research design

Case study research design was used in this study because of time and cost considerations. This

involved collecting empirical data, generally from only one or a small number of cases. It usually

provided rich detail about other similar cases. A case study generally aimed to provide insight

into a particular situation and often stresses the experiences and interpretations of those involved.

It was useful when not much is known about a phenomenon through direct observation to give a

complete snapshot of a case that is being studied (Ball, 2015).

3.4 Data collection

Primary data collection methods was used to get information from respondents

3.4.1 Primary data collection methods/tool

Primary data collection methods was used by the researcher to collect data from the field through

questionnaires.

(i) Questionnaires

Questionnaires as tool was used to obtain information regarding local revenue generation from

the 6 URA Revenue Collectors/debt Management & Compliance Department employees

(Assessors and tax collectors), 5 Municipal staff that was requested to respond to the

questionnaires. These include those from local revenue generation section, planning section,

accounts, procurement and human resource sections other than the Management team in the

preceded section. The questionnaire consisted of properly constructed open and close ended

questions in order make it easier to obtain precise answers from the respondents. Expert opinion

was sought for in order to validate the content and the structure of the questionnaire during the

pilot study. Questionnaires complement and supplement information was obtained from

interviewers and documentary review. This will enable checking up of consistency of responses

to the questions asked in repeated measurements (Carmines and Zeller, 1979).

3.5 Population

The study population was 2080 respondents purposely and randomly chosen from the leadership

structure of Wakiso municipal Council URA Wakiso branch and tax payers (Primary data, 2019).

33

Cooper and Schindler (2008) argued that, for any valid and reliable study to be carried, However

because of the homogeneity of the categorized of respondents and resource limitation, these

numbers is considered satisfactory for the study. Table 3.1 shows the distribution of respondents.

3.6 Sample size

From the total population of 2080 employees of Wakiso Municipal, URA Wakiso Branch in

Wakiso municipality, the sample size was 315 employees. The sample size was determined using

the Slovene’s formula; which states as follows:

n N

1+N (a)2

Where n is the sample size, N stands for population and a2 is 0.05 level of significance.

n = 2080

1 + 2080 (0.05)2

n 2080

1 + 2080 (0.0025)

n = 2080

1 + 5.2

n = 2080

6.2

n = 315

The sample size was 315 respondents as selected from the following categories. Table 1 shows

the distribution of population and sample size.

Table 3.1: Sample distribution of respondents

S/N Category Population Sample size1. District administrators 03 032. Head of units 05 053. Revenue Accountants 40 174. Planning officers 50 305. Revenue collection Agents 250 606. Business traders 610 907 Residents of Wakiso District 1100 110

Total 2080 315Source: Wakiso District Local Government Report (2019)

34

3.5.1 Sampling techniques

The study utilized two sampling procedures namely; purposive and stratification sampling.

(i) Purposive sampling

This method was used to select the targeted respondents as indicated because random sampling

procedure did not apply here where the respondents must be in a given position related to local

revenue generation planning and actions. Or the roles s/he played in relation to that particular

business/activity.

(ii) Stratification sampling

This method was used to tax payers focusing gender distribution and status in order to obtain

views from women and men (both) as well as low medium and higher class entrepreneurs. The

respondents stratified will be drawu among tax payers registered by the LGA. The strata were

formed based on members? shared attributes or characteri~tics (status) then a random sample

from each stratum was taken These subsets of the strata were then pooi to form a random sample

(Castillo, 2009). The reason according to Yin (2003) is that, stratification serves the distribution

among heterogeneous population which needs to be incorporated for the purpose of gaining

insights from it.

3.6 Data analysis techniques

According to Mwanje (2001), the nature of the problem to a large extent dictates the type of data

analysis technique to be used. The data was obtained from both qualitative and quantitative

approaches, therefore, after data refining, the refined data from questionnaires were coded into

specific categories and subjected to the statistical package for social science (SPSS) computer

software procedures and simple statistics such as frequencies and percentages will be used to

summarize the data. Findings were summarized and presented in terms of tables, charts, and

graph and finally were discussed around major research themes.

3.7 Reliability and Validity of Measurements

3.7.1 Reliability

Reliability refers to the extent to which data collection techniques yielded consistent findings,

similar observation, was made or conclusions reached by other researchers or there was

35

transparency in how sense was made from the raw data (Saunders, et. a!., 2009). This ensured by

having an interviewer-administered questionnaire to guide the interview rather than the “drop

and collect later” approach. This ensured that respondents answer the same questions and in the

same order with control by the researcher where potential misunderstanding of the questions was

detected and rectified during the interview process.

3.7.2 Validity

Validity is concerned with whether the findings are really about what they appear to be about

(Saunders, et. al., 2009). Also validity is concerned with the idea that the research design fully

addresses the research questions and objectives researcher is trying to answer and achieve

respectively. To ensures validity, this study used number of measures: (i) focusing on officers

who deal daily with revenue collections, budgeting and planning decisions of the councils tQ

reduce the possibility that the results may be biased simply because the respondents did not have

the opportunity to understand or participate in the budgeting decision processes or revenue

collection, (ii) having more than one officer in each councils’ department participating in the

interview answering the same questions and in the same order, the purpose being to

countercheck whether different officers give same account of the subject matters being

investigated.

3.8 Ethical Consideration

The researcher asked the informed consent from the respondents to willingly participate and

provide information. The researcher observed the right of the respondents to privacy and

confidentiality of the information they provided. In ensuring research principles, the researcher

ensured confidentiality on personal identities of the respondents and those associated with the

information they provide.

(i) Freedom The researcher’s freedom was given by allowing him to have all access to the data

that he needs to collects. Also gains his freedom through the free contact with his candidates that

were participated within the collections of data. When the interviewers and the authorized

officers concern show a full corporation and have no limit, then the Researcher have freedom

(William, 2007).

36

(ii) Confidentiality The Researcher has full confidence when there is maximum security and

freedom during the data collection period. This made a total assurance of conducting his research

in peaceful way (William, 2007).

(iii) Feedback The feedback of the public and the audience that have been questioned through the

questionnaires to the Researcher is obtained through choosing the right sample to access. The

right sample was aware of what you (Researcher) are asking and can provide you with the best

feedback. Selecting a wrong sample cannot give the Researcher that expected feedback that he

hopes to get.

3.9 Anticipated limitations

In view of the following threats to validity, the researcher ~claimed an allowable 5% margin of

error at 0.05 level of significance. Measures are also indicated in order to minimize if not to

eradicate the threats to the validity of the findings of this study as follows:

1. Extraneous variables which were beyond the researcher’s control such as respondents’

honesty, personal biases and uncontrolled setting of the study.

3. Testing: The use of research assistants were likely to bring about inconsistency in the

administration of the questionnaires in terms of time of administration, understanding

of the items in the questionnaires and explanations given to the respondents. To

minimize this threat, the research assistants were oriented and briefed on the

procedures to be done in data collection and their role was restricted to that.

1. Attrition: Not all questionnaires were returned neither completely answered nor even

retrieved back due to circumstances on the part of the respondents such as travels,

sickness, hospitalization and refusal/withdrawal to participate. To this, the researcher

reserved more respondents by exceeding the minimum sample size. The respondents

were also be reminded not to leave any item in the questionnaires unanswered and

will closely be followed up as to the date of retrieval.

37

CHAPTER FOUR

PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS

4.0 Introduction

This chapter presents analyses and discusses the study findings arising from the field information

collected from respondents during an investigation on factors affecting revenue generation by

local government for social service delivery in Wakiso District Local Government. The first

section of this chapter describes the background characteristics of the respondents; the second

section examines the nature of the local revenue sources. The third section analyses the trends of

local revenues Wakiso District Local Government in the last 5 years. The fourth section assesses

the factors affecting local revenue collection in Wakiso District Local Government and the fifth

section suggests possible ways of improving generation of local revenues by Wakiso Local

Government.

4.2 Response rate

The response rate of the study was determined to assess the exact number of respondents who

participated in the study from target sample size of 315, the researcher managed to access 307

and the results are presented in the table below:

Table 4. 1: Sample response rate

Targets Targeted samples Received Response rate

Quantitative 307 300 98%

Qualitative 08 07 88%

Total 315 307 97.5%

Source: Primary data, 2019

The researcher distributed 307 questionnaires to the respondents and out of these, 300

questionnaires in total were returned representing a 98% response rate as indicated in the table

above and qualitative data response was 88%. Bailey (1999) a response rate that is above 40% is

acceptable in research (Groves, 1987). However, the overall percentage participation exceed the

confidence interval of 95%.

38

4.3 Demographic characteristics of the respondents

The background for the study includes sex, age group, education, departments and length of

service at Wakiso District Local Government.

4.3.1 Respondent by Sex

This shows the sex of participants for the study in terms of female and male.

Figure 4. 1: A pie — chart showing sex of the respondents

Sex of respondets

Source: Primary data (2019)

~i Male L Female

It was revealed by the results of this study that most of the respondents 173(56%) were females.

Less respondents 134(44%) were males. This means that Wakiso District local government

employs more females than males. However, the study received balanced views from both male

and females which guaranteed reliability of the data.

4.3.2Age group of the respondent

This establishes the age distribution of staff and residents of Wakiso District in Uganda.

39

Figure 4. 2: A pie-chart showing age group of the respondents

Source: Primary data (2019)

It was revealed by the results of this study that majority of the respondents 113(36%) were

between 31 — 35 years; 76(26%) were aged between 26 — 30 years; followed with those aged

between 36 — 40 years represents 55(18%); followed with those age between 20 — 25 years with

a representation of 35(12%) and the least respondents 28(9%) had their age ranging between 41

and above years. This implies that Wakiso District local government employees adults and all

age categories were enlisted making the study balanced and more reliable.

4.3.2 Highest level of education of the respondent

This establishes the education qualification of the staff and residents of Wakiso District in

Uganda.

age of respondents1120-25 1126-30 n31-35 1136-40 •4landabove

40

Figure 4. 3: A Column graph showing highest level of education

Source: Primary 2019

It was revealed by the results of this study that majority of the respondents 104(35%) had

attained their first degree of education, followed with masters~ degree representing 70 (23%),

followed with diploma holder representing 61(20%), followed with secondary level of education

representing 46(15%) and the least representing 25(8%) were among others. This means that

Wakiso District local government employs a qualified class of employees who are

knowledgeable enough to provide dependable information regarding better ways of revenue

collection.

4.3.3 Departments

This establishes the departments sampled for the study at Wakiso District in Uganda.

61

Highest ~evell of educationii Highest level of education

70

25

First degree Masters degree othersSecondary Diplomaeducation

41

Figure 4. 4: Departments of respondents

Source: Primary data (2019)

It was revealed by the results of this study that majority of the respondents 78(26%) were

belonging to accounting department, followed with financ~ department representing 62(21%),

followed with administration department representing 55(18%), followed with procurement

department representing 51(17%), following with auditing department representing 32(11%) and

the least respondents were from the community members 22(7%). This implies that most

respondents from Wakiso District local government were from the accounting department whose

knowledge was useful in understanding the issues related to revenue issues in the district.

4.3.4 Length of service at Wakiso District

This establishes the length of services of the respondents at Wakiso District in Uganda.

ii Administration department t~ Accounting department

n Procurement department • Audit department

Department of respondentsu Finance department

U Community members

42

Figure 4. 5: A bar graph showing length of services of respondents

Length of service~ Length of service

Iessthaanlyear ItIIiIIIIIIIIIIIIIiiIIIIIJII 43

1-5years jJjJ~jjf~f~ j~JJ~ 52

6-lOyears ~Ii 82

11-l5years •iiiii~i~~ •~-iiiii~• 64

15-2Oyears j.J~jjjj 31

2landabove IIII~Jj~ji 28

Source: Primary data (2019)

It was revealed by the results of this study that majority of the respondents 82(27%) had a length

of service ranging from 6 — 1 Oyears, followed with those from 11 — 15 years representing

64(21%), followed with those range from 1 — 5 years representing 21(17%), followed with those

less than lyear representing 43(14%), followed with those between 15 — 20 years representing

3 1(10%) and the least represent 28(9%). Results imply that most the employees in Wakiso

District local government have a bigger length of service above 6 years, which means that they

have been with the district long enough to be well acquitted with issues to do with the revenue

collection in the district.

4.4 Descriptive statistics and qualitative analysis.

This is presented in terms of study objectives include the nature, trend, factors affecting local

revenue collections and possible ways of improving local revenues in Wakiso District.

43

4.4.1 The Nature of the Local Revenue Sources existing in Wakiso District Local

Government

The first objective of this study sought to examine the nature of the local revenue sources

existing in Wakiso District Local Government. Basing on the findings of this study, results

obtained were as illustrated in the following sub-themes below;

Table 4. 2: Major sources of local revenue for Wakiso Local Government

Sources of revenue Freq Percentage %

Property Tax 31 10

Fish levy 19 6

Hotel levy 23 8

Vaccination fees 16 5

Business licenses 97 32

Intoxicating Liquor licenses 8 3

Fines 12 4

Penalties 7 2

Revenue from agricultural 18 6

and forestry products

Market fees 56 19

Bus stand and car parking 13 5

Total 300 100

Source: Primary data (2019)

It was revealed by the findings of this study that the major source of local revenues was business

licenses 97(32%). This was followed by market fees 56(19%), followed by property tax

31(10%), followed by hotel tax 23(8%), followed by fish levy 19(6), followed by fascination

fees by 16(5%), followed by bus stand and car parking 13(5%), followed by fine 12(4%) and

least was intoxicating liquor licenses 8(3%). This implies that the major sources of revenue for

Wakiso District are connected to the most prominent activities that fetch daily income for the

people in the district. This implies that the district has to prioritise these economic activities to

44

support them grow for income sustainability. While there are several sources of revenue, results

demonstrate a high dependence on just two sources i.e. business licences and market fess

amongst others that creates a risks in local revenue collections. Supplements from interviews

mentioned that property tax, fish levy, hotel levy, vaccination fees, business licenses, fines,

penalties, revenue from agricultural and forestry products, market fees, bus stand and car parking

as the known common sources of local revenues levied in Wakiso District.

4.4. 2 Rating the level of effective collection of the sources of revenues in local governments

This establishes the rate of local revenue collection effectiveness in local government as set out

below in table 4.3

Table 4. 3: Rating the level of effective collection of the sources of revenues in local

governments

Sources of Level of Effectiveness N %Revenue Highly Effective Ineffective Highly

Effective ineffective

Freg Perc% Freg Perc% Freg Perc% Freg Perc%Property Tax 55 18 104 35 95 32 46 15 300 100Fish levy 66 22 102 34 85 28 47 16 300 100Hotel levy 54 18 103 34 93 31 50 17 300 100Vaccination fees 42 14 102 33 100 33 53 18 300 100Business licenses 59 20 108 36 85 28 48 16 300 100Intoxicating Liquor 60 20 104 35 85 28 51 17 300 100licensesFines 49 16 103 34 100 33 48 16 300 100Penalties 62 21 98 33 86 29 54 18 300 100Revenue from 56 19 101 34 92 31 51 17 300 100agricultural andforestry productsMarketfees 55 18 104 35 95 32 46 15 300 100Bus stand and car 66 22 102 34 85 28 47 16 300 100parkingSource: Primary data (2019)

It was revealed by the results of the study that majority of the respondents 108(36%) agreed that

business licenses is the most effective source of revenue collections in Wakiso. This is closely

followed by market fees representing 106(36%) followed by property tax, bus stand and car

45

parking fees and intoxicating liquor licenses representing 104(35%) followed with fines, fish

levy and hotel levy representing 103(34%) followed with vaccination fees representing

102(33%) followed with revenue from agricultural and forestry products and the least were

penalties representing 98(33%). This implies that the district rely mainly on business licences

and market fees to collect local revenue to finance activities in the community since they are

within the direct source of income for the people.

However, the district seem to over pressurise the business community to comply with tax, which

slow down their performance and deter enterprise growth as well as the general district economic

performance. Penalties are least effective and slightly ineffective representing 86(29%), thus

indicating inefficiency in their administration since the law breakers require enforcement to

comply which is probably absent within the district structure. Local revenue collections are

required for the LG to supplement the fund transfers from central treasury to effectively finance

activities within the community. This agrees with Tayebwa (1998) who opine that efficient tax

administration enables government to raise income for financing public activities like schools,

roads health unit amongst other. Furthermore, Veron (2012) argued that business owners are

easy to coerce for tax payments other than individuals, which necessitates effective collection of

market dues through the tender and license.

46

4.4.3 Actions done to ensure that above-mentioned sources of revenue are effectively

managed

Table:4. 4: Actions done to ensure that above-mentioned sources of revenue are effectively

managed

Responses Freq Percentage%

Involvement of police in enforcement of revenue collection 12 4Identification of more revenue sources 33 1 1Sensitization of taxpayers 19 6Acquisition of motorcycles for revenue collection 21 7Training 1 1 4Quarterly performance review on revenue collection 16 5Establishing revenue enhancement committee for the town 14 5councilEnsure regular meetings for the revenue enhancement 28 9committeeEstablishing revenue information management system 10 3Embark on vigorous tax education campaign to create 8 3awarenessDocumenting and sharing lessons learnt in revenue collection 14 5The urban council also intends to undertake massive 15 5advertisementThe urban council continue promoting public-private 6 2partnership buildingThe council tries to remain transparent and accountable to the 13 4publicThe audit department carryout value for money auditing 10 3The council embarks on generating relevant statistics and 19 7informationThe council advocates for re-introduction of the G/tax 18 6compensationIncrease budget allocation 17 6Revenue to purchase taxable assets 16 5Total 300 100Source: Primary data (2019)

It was revealed that when respondents were asked to give their opinions on the actions done to

ensure that the above-mentioned sources of revenues are effectively managed, majority of the

respondents said identification of more revenue sources representing 33(1 1%), ensuring regular

meetings for the revenue enhancement committee representing 28(9%), acquisition of

motorcycles for revenue collection representing 21(7%) and the least representing 6(2%) said

urban council continue promoting public-private partnership building. This imply that most of

47

the staffs in Wakiso district local government said that identification of more revenue sources is

the most effective means for making revenue generation effective for improving revenue

sustainability. This agreed with Fjelstad, (2004) who argued that identification of more revenue

sources, sensitization of taxpayers, acquisition of motorcycles for revenue collection, training,

quarterly performance review on revenue collection, establishing revenue enhancement

committee for the town council, ensure regular meetings for the revenue enhancement

committee, establishing revenue information management system, embark on vigorous tax

education campaign to create awareness are viable strategies to effectively collect local revenues.

4.4.4 The category of payers to meet the burden of revenue payment in Wakiso district

This establishes the category of payers to meet the burden of revenue payment in local

government as set out in table 4.5

Table:4. 5: The category of payers to meet the burden of revenue payment in Wakiso district

Category Mean Std.General Public 4.2857 .68 157Forest users 4.2429 .71843Shop Owners 2.2500 .72096Marketvendors 2.1286 .71514Fishermen 4.1643 .68500Car owners 3.9214 .70013Lock up renters 3.53 57 .96269Slaughterhouses 3.8714 .88018People doing Medical 3.7929 .70452examinationGeneral Business 2.1214 .72437Property owners 4.0500 .73284Forest users 4.2571 .59217Source: Primary data (2019)

It was revealed that in table 4.5 majority agreed to shop owners with the mean of 2.2500 and

standard deviation of 0.72096, market vendors with mean 2.1289 and standard deviation of

0.715 14 and general business with the mean of 2.12 14 and standard deviation of 0.72437 were

the major savior burden bearer of revenue payments in Wakiso District. The major shop owners,

market vendors and general business are the major category of taxpayers who are faced with the

48

burden of revenue payment at Wakiso District. However, disagreed with the mean of 4.00 those

general public, forest users, fishermen, property owners were the least burden bearer of the tax.

This implies that the district constrain the business community when collecting the tax, which is

slightly biased since other sectors are the majority and need social service. This further

contributes to the low revenue collections since the many sectors seem not complying to

payment of revenue as the burden is pushed to entrepreneur. This agreed with Okello (2011) who

asserts that shop operators, market vendors and general business are the most compliant category

of tax payers since their businesses are the sole source of income for survival and tax compliance

strengthen their reputation. This burden however could be transferred to the public inform of

high prices for goods and services provided b these businesses.

4.4.5 Estimate volume of revenue paid by revenue payers at Wakiso District

This establishes the dominant estimated volume of revenue paid by taxpayers in local

government as set out in table 4.6

Table:4. 6: The estimate volume of revenue paid by revenue payers

Revenuepayers 10,000—250,000 260,000 — 510,000 — Total Total500,000 1,000,000 (N) (%)

Freg Per % Freg Per % Freg Per %General Public 102 34 123 41 75 25 300 100Forestusers 75 25 118 39 107 36 300 100Shop Owners 102 34 79 26 119 40 300 100Market vendors 97 32 71 24 132 44 300 100Fishermen 84 28 122 41 94 31 300 100Car owners 88 29 121 40 91 30 300 100Lockup renters 92 31 124 41 84 28 300 100Slaughter houses 101 34 121 40 78 26 300 100People doing Medical 98 33 122 41 80 27 300 100examinationGeneral Business 88 29 78 26 135 45 300 100Property owners 88 29 135 45 78 26 300 100Source: Primary data (2019)

Findings on the estimate volume of revenue paid by tax payers whereby the general public

123(41%), forest users 118(39%), Fishermen 122(41%), Car owners 121(41%), Lock up renters

124(41%), Slaughter houses 121(40%) and people doing medical examination 122(41%) pay

49

middle range revenue between Ugx 260,000 to Ugx 500,000. This might point to a possibility of

low fees instituted for the activities and therefore easily affordable. Such fees could on the other

hand encourage the tax payers and discourage avoidance thus a steady flow of revenues to the

district.

The shop owners representing 119(40%), market vendors 132(44%) and general business 135

(45%) pay the highest revenue scale ranging from Ugx 510,000 to 1,000,000. These are three

sectors with the burden of paying higher amount of money leaving out many sectors which

adversely affect revenue collections at the district. Tax payers pay above Ugx 260, 0000 to Ugx

1000,000, which guaranteed adequate revenue collections for the district. The district should

devise means of having more tax payers in the high band since it will guarantee enhanced

revenue collection.

4.4.6 The actors used by Wakiso District Local Government in collecting revenue

This establishes the actors used to collect revenues in local government as set out in table 4.7

Table:4. 7: The actors used by Wakiso District Local Government in collecting revenue

Responses Freg Perc%Revenue Collection Agents 66 22Wakiso District Local 139 46Government StaffUganda Revenue Authority 53 18All of the above 42 14Total 300 100Source: Primary data (2019)

It was revealed by the results of this study that the major actors used by Wakiso district local

government in the collection revenue were Wakiso district local government staff 139(46%)

followed with revenue collection agents represent 66(22%) followed Uganda Revenue Authority

representing 53(18%), however, all the above are used in local revenue administration. This

implies that Wakiso district local government staff dominate the struggle to collect local

revenues is the most important actor use by the district in the collection of revenues.

50

4.4.6 The extent to which actors are effective in revenue collection

This establishes the extent to which actors are effective in revenue collections in local

government as set out below in table 4.8

Table 4. 8: The extent to which actors are effective in revenue collection

Actor Level of Effectiveness N %To a large To some To a small Not at allextent extent extent

Freg Perc% Freg Perc% Freg Perc% Freg Perc%Revenue Collection 66 22 102 34 85 28 47 16 300 100Agents.Wakiso District 49 16 108 36 95 32 48 16 300 100Local GovernmentStaffUganda Revenue 56 19 101 34 92 31 51 17 300 100Authority.Source: Primary data (2019)

It was revealed by the results of this study that majority of the respondents 102(34%) said that

revenue collection agents are to some extent effective in the collection of revenue, however,

47(16%) disagreed. This implies that some revenue collection agents are not serious with their

work, thus requires regular remainders and supervision from top administrators especial the chief

administrative officers, residential district commissioner and district chairman LC 5. These are

empowered by the district by-laws support with the local government budgetary framework

manual of 2007.

Majority of the respondents 108(36%) also said that Wakiso district local government staff to

some extent are effective in revenue collection and respondents representing 101(34%) also said

that Uganda Revenue Authority is to some extent effective in revenue collection. Results imply

that the most effective actor of revenue collection in Wakiso district local government are the

district staffs which increases the sustainability of revenue collection because these are aware of

the weakness and challenges in revenue collection. This is supported by Section 79 of the 1995

Constitution of Uganda as a mended, which states that local government revenues shall be

51

regulated as provided for in the fifth schedule. These legal provisions directly or indirectly

provide certain people and institutions with roles and responsibilities to monitor local revenue

collection in LG’s such as council, C.A.O and R.D.C. Chief Finance Officer however, is

empowered to monitor in order to ensure that the revenue collectors carryout their duties

property and that all revenue due to local governments is collected promptly.

4.5 The trends of local revenues in Wakiso District Local Government in the last 5 years

The second objective of this study required the researcher to analyze the trends of local revenues

in Wakiso District Local Government in the last 5 years. Basing on the findings of this study,

results were as shown in figure 4.6;-

Figure 4. 6: Trend of revenue collections for the last 4 years

Source: Wakiso District Local revenues in the last 4 years

It was revealed by the results of this study that local revenue increased in 2015/2016 from Ugx

12.6M to Ugx 16.1M and decreased to Ugx 10.3M, and later slightly increased to Ugx 10.6M.

The trend is fluctuating over the time, which implies that there is the decline in the performance

of economic activities. Furthermore, it seems that the district is reluctant to enforce tax payers.

Revenue trend between 2014 2018 inmiNion

u Revenue trend between 2014 - 2018 in million

16.1

12.6

10.3 10.6

2014/2015 2015/2016 2016/2017 2017/2018

52

Supplement from interviewee asserted that, there is tremendous decline in revenue collections to

high rate of non-compliance of taxpayers due to suspected corruption, bribery, wrong assessment

and political influence which regularly deter tax enforcement from dealing with rebellious

taxpayers as prescribed within the Wakiso District by-laws.

Table:4. 9: The reasons for the trend in revenues collected over the last 4 years

Reasons True Uncertain Not TrueFreg % Freg % Freg %

There is improved local revenue collection due to 92 31 124 41 84 28political interestLimited knowledge of revenue sources 101 34 121 40 78 26Corruptive tendency of revenue collectors 98 33 122 41 80 27Low levels of tax information awareness 102 34 119 40 79 26Poor attitude of tax payers has led to a reduced revenue 68 23 132 44 100 33collectionIncreased economic activities 72 24 128 43 100 33Improvement in collection methods 75 25 118 39 107 36Contracting out the collection of the taxes 68 23 131 44 101 34General urbanization has led to increased revenue 84 28 122 41 94 31sourcesPolitical influence has negatively affected revenue 88 29 121 40 91 30collectionsGrants from Central Government have increased over 92 31 124 41 84 ‘28the timeGrants from donors have increased over the time 105 35 121 40 75 24Source: Primary data (2019)

It was revealed by the results of this study that majority of the respondents 124(41%) were

uncertain about the influence of political interest on local revenue collections. This implies that

respondents were skeptical to determine the magnitude of the political interest towards

inducement of taxpayers to comply on the local revenue payment since some of them like district

chairman and councilors are part of revenue enforcement administrators.

It was revealed by the results of this study that majority of the respondents 12 1(40%) were

uncertain the influence of limited knowledge of revenues source on the revenue trend, 122(41%)

were uncertain about the corruptive tendency of revenue collectors, 119(40%) were uncertain on

low levels of tax information awareness, 132(44%) were uncertain on poor attitude of tax payers,

128(43%) were uncertain whether there is increases economic activities, 13 1(44%) were

53

uncertain on influence of out sourcing of revenue collectors, 122(41%) were uncertain whether

general urbanization led to increased revenue sources, 121(40%) were uncertain on political

influence, and 124 (4 1%) were uncertain on the variations about grants from local government.

This implies that the district has dysfunction system of administration, which hinders staff to

follow up the trend of revenue or it is probable that the staff are reluctant to follow up the district

programs which is connected to poor system of administration.

Table:4. 10: The extent to which the following factors lead to low revenue collection

Actor Level of EffectivenessTo a large To some To a small Not at allextent extent extent

Freq Perc Fre Perc Fre Perc Fre Perc%___ % ~q__% %

Delay in completing development 62 20 98 33 86 29 54 18projectsUnder performance of the District 56 19 101 34 92 31 51 17CouncilsFailure to offer timely social services 66 22 102 34 85 28 47 16Poor social services delivery to the 54 18 J03 34 93 31 50 ‘17peopleLow level of productivity among the LG 42 14 107 36 - 98 33 53 18employeesPoor road network in the local 66 22 102 34 85 28 47 16governmentsIncreased dependency on Central gov’t 49 16 108 36 95 32 48 16grantsSource: Primary data (2019)

It was revealed by the results of this study that majority of the respondents 101(34%) said that to

some extent under performance of district councilors lead to low revenue collections, 102(34%)

said that failure to offer timely social services lead to low revenue collections, 103(34%) agreed

to poor social services delivery to people, 107(36%) agreed to low level of productivity among

LG staff as factor leading to low revenue in the district. This implies that the district operating

environment affects revenue collections.

It was revealed by the results of this study that majority of the respondents 108 (36%) said that to

some extent increased dependency on central government grants is an effective effect of low

revenue collection in Wakiso District Local Government. This imply that the district over rely on

54

central government grants which are remitted quarterly and mainly conditioned, thus delay

financing of immediate activities to the local community. This agreed with Mama (2013) who

conjure that the over dependence of local government on central government transfers delays

immediate financing of activities and always conditional, however, there are unconditional

transfers which do not have such restrictions, and local governments may choose where the

funding will be used.

0

4.6 The sectors mostly affected as a result of low revenue collection

This establishes the most affected sectors of LG as a result of low revenue collection.

Table:4. 11: The sectors mostly affected as a result of low revenue collection

Responses Freg Perc%Health sector 78 26Education sector 56 19Infrastructure sector 42 14Security sector 31 10Accountability sector 93 31Total 300 100Source: Primary data (2019)

It was revealed by the results of this study that the most affected sectors as a result of low

revenue collection was accountability sector representing 93(31%) followed with health sector

representing 78(26%) followed with education sector representing 56(19%) followed with

infrastructure sector representing 42(14%) and the least is security sector representing 3 1(10%).

This imply that district accountability and health sector were the most affected sectors of low

revenue collection, thus contribute to poor health services in Wakiso District Local Government.

Accountability sector is basically for the overall administration which is at the center of offering

services to the community. This agreed with Finkler (2005) who argues that absence of fair

assessment as applicable in the law leads to non-compliance to tax payments which adversely

affect the performance of sectors in local government.

55

4.7 Factors Affecting Local Revenue Collection in Wakiso District Local Government

The third objective of this study sought to assess the factor~ affecting local revenue collection in

Wakiso District Local Government. Basing on the data obtained from the field, findings are

elaborated in the following sub-themes and illustrations hereunder,

4.7.1 Reasons for changing revenues collected from revenue sources

This establishes the reasons contributing to changes in management of local revenues sources.

Table:4. 12: Reasons for changing revenues collected from revenue sources

Items N Mm Max Mean Std.Incompetent revenue assessors 300 1.00 5.00 1.454 0.608Poor planning on revenue management 300 1.00 5.00 1.64 1 0.592low awareness on the effective revenue sources 300 1.00 5.00 4.246 0.590limited use of proper feasibility studies 300 1.00 5.00 1.765 0.762Poor assessment of tax / levy due to clients’ avoidance 300 1.00 5.00 2.132 0.846tricksThe cost of tax collection leads to a reduction in revenues. 300 1.00 5.00 1.122 0.722collected.The interference of the local politicians on the local 300 1.00 5.00 4.619 0.486revenue collections.The high dependence on central government grants / 300 1.00 5.00 4.732 0.345transfers negative affects local revenue collection.Dishonest of revenue collectors leads to reduced revenues 300 1.00 5.00 4.092 0.411collectedLack of enforcement on revenue collection 300 1.00 5.00 4.0 15 0.792The tendering of local revenue sources affected the 300 1.00 5.00 2.362 0.236volumes of revenue collectedSource: Primary data (2019)

It was revealed by the results of this study that majority of the respondents strongly agreed with

incompetent revenue accessors leads to a reduction in revenues collected (Mean = 1.454, Std=

0.608). This implies that changes in revenue collected from local revenue sources is affected by

the incompetent revenue accessors who either under or over accesses the tax payers, which lead

to revenue payment non- compliance in Wakiso district local government. This is supported with

Schedol (2011) who argues that incompetent revenue accessors leads to taxpayers’ non

compliance in local government.

56

It was revealed by the results of this study that majority of the respondents strongly agreed to

poor planning on revenue management as the cause of reduction in revenues collected from local

sources (Mean = 1.641, Std= 0.5 92). This implies that changes in revenue collected from local

revenue sources is affected with poor planning on revenue management which lead to poor

accountability and corruption. This contributes to poor service delivery at the district. Poor

planning has an adverse effect on the town’s achievement of development activities like

assessment and collection of allowable town revenue. Hence, planning system should be

improved in a way that can forecast future actions properly. This agreed with Carroll and

Johnson (2010) who conjure that poor revenue management adversely affect tax payers’

compliance to payment of local taxes in local government.

It was revealed by the results of this study that majority of the respondents strongly agreed with

limited use of proper feasibility studies as a significant factor leading to low revenue collection

in Wakiso District local government (Mean 1.765, Std = 0.762). This implies that limited use

of proper feasibility studies affects changing revenue collection in Wakiso District local

government. Feasibility study facilitates formation of viable revenue collection projections

which guide collection of local revenues for the local government entities.

It was revealed by the results of this study that majority of the respondents strongly agreed with

cost of tax collection leads to reduction in revenue collected in Wakiso District local government

(Mean = 1.122, Std 0.722). This implies that costs incurred to collect revenue deemed to be

higher than actual revenues which lead to low collections in Wakiso District local government.

The district needs to review the revenue collection costs in comparison with actual collections at

to establish the corrective action to mitigate the variance.

Supplements from interviews asserted inefficient revenue accessors, poor planning, absences of

feasibility studies to establish the viability of tax, incurring high cost to collect tax, wrong

tendering of local revenue collection sources leads to inefficient management of revenue

collection in Wakiso District.

57

4.7.2 The extent to which factors influence revenue collection at Wakiso District Local

Government.

Response Scale: 1- To a large extent, 2 - To some extent, 3 - To a small extent and 4 - Not at all.

Table:4. 13: The extent to which factors influence revenue collection at Wakiso District Local

Government

Extent N Mm Max Mean Std.Productivity 300 1.00 4.00 3.350 0.257Efficiency 300 1.00 4.00 2.305 0.823Fare levels 300 1.00 4.00 3.584 0.253Tax (Revenue) rate 300 1.00 4.00 1.144 1.194Coerciveness 300 1.00 4.00 3.378 1.449(Enforcement)Source: Primary data (2019)

It was revealed by the results of this study that majority of the respondents agreed that to a large

extent tax (revenue) rate influencing revenue collection at Wakiso district local government

(Mean=1.144, Std = 1.194). There is an inverse relationship between the tax rate and the

taxpayer’s ability to pay, as measured by asset, consumption, or income. The lower the tax rate

the high the compliance on tax and the higher the taxpayers’ compliance on local revenue

payment for local government. The local government follows presumptive income tax provision

section 4(5)-7 to determine taxes on business units whose turnover exceed Ushs 50 million but

does not exceed Ushs 150 million.

It was revealed by the results of this study that majority of the respondents agreed that to some

extent efficiency influences revenue collection at Wakiso~ district local government (Mean

2.305, Std = 0.823). This means that efficiency to some extent influence revenue collection in

Wakiso district local government. The tax assessed to taxpayers deemed efficient which

accelerates revenue collections. This agreed with the four cardinal principles of Adam Smith

(1776) recommend that equity, certainty, convenience and efficiency as the mechanism to

influence tax payments.

58

It was revealed by the results of this study that majority of the respondents agreed that to a small

extent, productivity (Mean 3.350, Std = 0.257) and coerciveness (enforcement) (Mean = 3.378,

Std = 1.449) influence revenue collection in Wakiso District local government. Productivity

indicates that tax levied produce sufficient revenue since deemed preferred over a larger number

of small tax payers while enforcement is the use to force to induce compliance to tax payment in

Wakiso District local government. Enforcement is supported with Odd-Heldge Fieldstad (2004)

who asserts that enforcement involves using task force comprising of parish chiefs, revenue

officers and enforcement officer to collect the tax from defaulter.

Supplements from interviews asserted that charging low rates, use of enforcement where

necessary, raising continuous awareness on taxpayers and engagement of stakeholders during

planning for tax positively influence local revenue collections in Wakiso District.

4.7.3 The extent to which the following factors contribute to the failure of revenue

collection

This establishes the factors contributing to the failure of revenue collections in the local

government. Response Scale: 1- To a large extent, 2 - To some extent, 3 To a small extent and

4-Notat all

Table:4. 14: The extent to which the following factors contribute to the failure of revenue

collection

Extent N Mm Max Mean Std.Poor Financial Records 300 1.00 4.00 3.144 1.194Lack of enough equipment 300 1.00 4.00 1.378 1.449Inadequate staff 300 1.00 4.00 3.408 1.33 1Resistance to pay revenue 300 1.00 4.00 4.567 0.22 1Failure to carry out feasibility study 300 1.00 4.00 2.183 0.615Failure to notify people on time of their dues 300 1.00 4.00 2.412 0.409

Source: Primary data (2019)

It was revealed by the results of this study that majority of the respondents agreed that to a large

extent, lack of enough equipment contributes to the failure of revenue collection in Wakiso

district local government (Mean = 1.378 and Std = 1.449). This implies that lack of enough

59

equipment like vehicles and motor cycles to track all players legible to pay taxes largely

contributes to failure of revenue collection in Wakiso district local government.

It was revealed by the results of this study that majority of the respondents agreed that to a small

extent, failure to carry out feasibility study (Mean = 2.183, Std 0.615) and failure to notify

people on time of their dues (Mean 2.41, Std = 0.409) contributes to failure of revenue

collection in Wakiso district local government. Failure to carry out feasibility studies to map all

viable areas with taxpayers narrows the tax base for the district which leads to low revenue

collections. However, failure to notify taxpayers on time to appreciate the doctrine of

convenience to tax payments accelerate non-compliance to tax.

This agreed with Atan (2010) who assert that failure to create awareness to pay taxes contribute

to delayed tax payments in local government. Supplements from interviews asserted that poor

financial records, few revenue collectors, non-compliance due to resistance from taxpayers,

failure to sensitize taxpayers and absence of feasibility studies to map the tax payers contributes

to low local revenue collections in Wakiso District.

4.8 The Possible Ways of Improving Generation of Local Revenues by Wakiso Local

Government

Response Scale: 1- To a large extent, 2 - To some extent, 3 - To a small extent and 4 - Not at

all

Table:4. 15: The possible ways of improving generation of local revenues.

Statements N Mm Max Mean Std.Recruitment of qualified staff 300 1.00 4.00 3.905 0.823Developing adequate plans for revenue collection 300 1.00 4.00 3.584 0.253Identifying and introducing new revenue sources 300 1.00 4.00 2.144 0.194Carrying out benchmarking studies 300 1.00 4.00 1.378 0.449Improving relations between the District and the 300 1.00 4.00 2.408 0.33 1tax payersInstituting a computerized system for revenue 300 1.00 4.00 3.567 0.221collection and reportingProviding continuous training to tax collectors 300 1.00 4.00 1.183 0.615Monitoring and supervising revenue collectors 300 1.00 4.00 2.412 0.409Sensitizing the public on the need for the revenue 300 1.00 4.00 1.659 0.237Source: Primary data (2019)

60

It was revealed by the results of this study that majority of the respondents agreed that to a large

extent provision of continuous training to tax collectors improves generation of local revenues at

Wakiso District local government (Mean = 1.183, Std 0.615). Training of tax collectors on

handling and assessment of tax payers without enforcement influence compliance to tax

payment. This implies that training to tax collectors is a ~ignificant possible way of improve

generation of local revenue by Wakiso district local government. This agreed with Bird and Zolt

(2004) who assert that training of revenue collectors and assessors widen tax bases which

increase revenue collections.

It was revealed by the results of this study that majority of the respondents said that to a large

extent carrying out benchmarking studies can help to improve generation of local revenues by

Wakiso district local government (Mean = 1.378, Std = 1.449). Benching marking of successful

techniques used to effectively induce taxpayers compliance in other area facilitate improvement

on compliance rates. LG has to adopt already tested tax system to ensure effective tax

collections. This implies that carrying out continuous benchmarks greatly act as a possible way

of improving generation of local revenues by Wakiso District local government. This agreed

with Yousuf (2012) who argues that benchmarking of international successful tax system

facilitates compliance to revenue collections.

It was revealed by the results of this study that majority of the respondents said that to a large

extent, sensitizing the public on the need for the revenue (Mean = 1.659, Std = 0.237) can act as

a possible way of improving revenue generation by Wakiso district local government.

It was revealed by the results of this study that majority of the respondents said that to some

extent, identifying and introducing new revenue sources (Mean = 2.144, Std 1.194),

sensitization of the public on the need for the tax (Meanl.659, Std = 0.237), improving

relations between the District and the tax payers (Mean = 2.408, Std = 1.331) and monitoring and

supervising revenue collectors (Mean = 2.4 12, Std 0.409) can somehow help in improving

generation of local revenues by Wakiso district local government. This implies that sensitization

of tax payers about the need for revenue accompanied with quality service delivery improves the

relationship with the people which accelerate local revenue tax collections. This agreed with

61

Fjelstad, (2004) who argued that identification of more revenue sources, sensitization of

taxpayers, acquisition of motorcycles for revenue collection, training, quarterly performance

review on revenue collection, establishing revenue enhancement committee for the town council,

ensure regular meetings for the revenue enhancement committee, establishing revenue

information management system, embark on vigorous tax education campaign to create

awareness are viable strategies to effectively collect local revenues.

Supplements from interviews asserted that continuous training to tax collectors, sensitizing the

public on the need for the revenue, monitoring and supervising revenue collectors, improving

relations with the tax payers and identification of new local revenue sources to widen tax base

facilitate collection of local revenues in Wakiso District.

62

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS OF THE STUDY

5.1 Introduction

This chapter presents the descriptive and qualitative summary of findings following the research

questions, conclusions, recommendations and areas for further research.

5.2 Summary and conclusions

This section presents the summary of findings on each research question following the results in

the chapter four.

5.2.1 Nature of the local revenue sources Local Government

The major source of local revenues in Wakiso District were business licences, market fees

property tax, fish levy, hotel levy, vaccination fees, business licenses, fines, penalties, revenue

from agricultural and forestry products, market fees, bus stand and car parking. Local revenue is

from business entrepreneurs since it is an urban district neighboring Kampala with many

municipalities and town councils. The dominant category of tax payers to meet the burden of

revenue payments were shop owners, market vendors and general business with the estimated

volume of revenue between Ugx 510,000 to 1,000,000 million.

The actors in local revenue collection are Uganda Revenue Authority, District local government

staff and revenue collection agents. Furthermore, supplements from interview confirmed that that

property tax, fish levy, hotel levy, vaccination fees, business licenses, fines, penalties, bus stand

and car parking are the known common source of local revenues levied in Wakiso District. The

district projects over 70% of the budgeted revenue to accrue from business licenses, inspection

fees, local service tax, property related duties and other fees and taxes. This leaves a lot more

revenue potential not attended to furthering the risk of reliance on grants from the central

government.

The study concluded that local revenue sources are majorly from taxpayers, whose gross

turnover does not exceed 150 million shillings, thus indicating low local revenue prospects and

63

over-reliance on central government grants which poses a danger in funding priorities of the

district.

5.2.2 The trends of local revenues in Wakiso District Local Government in the last 4 years

The trend of local revenue fluctuates over years where by it increased Ugx 12.6M in 2014/2015

to Ugx 16.1M in 2015/2016 and decreased by Ugx 5.8M to Ugx 10.3M in 2016/2017 and later

slightly increased to Ugx 10.6M. The decrease in local revenue indicates poor performance

which is attributed to ineffective local revenue collection administration at the district. This is

supported with supplements from interviews that, there is tremendous decline in revenue

collections to high rate of non-compliance of taxpayers due to suspected corruption, bribery

wrong assessment and political influence which regularly deter tax enforcement from dealing

with rebellious taxpayers as prescribed within the Wakiso District by-laws.

The study concluded a tremendous decrease of local revenue collections from 2016 to date,

which could be the cause of the decline in service delivery, poor road network and general

infrastructure that would have otherwise improved the revenues. Many priority areas cannot get

done given the falling collections of the resource.

5.2.3 The factors affecting local revenue collection in Wakiso District Local Government

The dominant factors affecting changes in local revenue collection incompetent revenue

assessors, poor planning on revenue management, limited use of proper feasibility studies, high

cost of tax collection, poor assessment of tax / levy due to clients’ avoidance tricks and the

tendering of local revenue sources in local government. This therefore leads to low local revenue

collections by the district. Furthermore, factors contributing to the failure of revenue collections

in the local government were lack of equipment, failure to carry out feasibility study and failure

to notify people on time of their dues. However, tax rate influences compliance with local

revenue payments in Local Government.

Supplements from interviews asserted inefficient revenue assessors, poor planning, absences of

feasibility studies to establish the viability of tax, incurring high cost to collect tax, wrong

64

tendering of local revenue collection sources leads to inefficient management of revenue

collection in Wakiso District.

The study concluded that district local revenue mechanism is inappropriate which constrains the

entire revenue collection due to incompetent revenue accessors, poor planning on revenue

management, limited use of proper feasibility studies and high cost of tax collection, poor

assessment of tax leading to low local revenue collection at Wakiso District.

5.2.4 The possible ways of improving generation of local revenues by Wakiso local

government

The suggested ways of improving generation of local revenue were identification and

introduction of new revenue sources and benchmarking of successful techniques, improving

relations between the district and the tax payers, provision of continuous training to tax

collectors, monitoring and supervision of revenue collectors and sensitization of the public on the

need for the revenue.

Supplements from interviews asserted that continuous training to tax collectors, sensitizing the

public on the need for the revenue, monitoring revenue collectors, improving relations with the

tax payers and identification of new local revenue sources to widen tax base facilitate collection

of local revenues in Wakiso District.

5.3 Recommendations

The study recommends the following to induce talent management.

i. Wakiso District should sensitize the public on relevance of paying revenues using local

media, community meeting with local leaders and gathering like churches and mosques.

ii. Wakiso District should regularly carryout feasibility studies to map the areas where to

collect local revenue in order to increase on the taxpayers’ compliance rate.

65

iii. Local government should carry out research and benchmark modern techniques of

collecting local revenues. This should be integrated in the training package of tax

assessors and collectors.

iv. Local government should improve on their relationship with the public by engaging

community leaders, business representative and other stakeholders to plan for local

revenue collections.

5.4 Area of further studiesThe researcher recommends that further study be made ~on the impact of local revenue oii

organizational performance

66

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APPENDICIES

APPENDIX 1: LETTER OF INTRODUCTION TO THE REPONDENTS

Dear Sir/Madam,

I’m Godfrey Joseph, a student from Kampala International University (KIU). I am doing

research on legal framework and local revenue generation in Wakiso municipality council and

therefore the purpose of this questionnaire is to capture information that will reflect the study

topic at Wakiso Municipality in particular as a study area. I kindly ask you to assist me in my

study by answering the following questions. I would like to mention that the research is for

academic purposes only and the information will be treated highly confidential and will not be

used in any other form besides the intended academic purpose.

For any clarifications, please contact the researcher on mobile phone number

I take this opportunity to thank you in advance for your cooperation.

Sincerely

Godfrey Joseph

KIU Student

72

APPENDEX II: QUESTIONNAIRE

PART A: BACKGROUND INFORMATION

Please put a tick (q) in the appropriate box () as the most agreed answer to the following

questions:

1. Sex of Respondent:

Female Male

2. Age Group of the Respondents

20—2526—3031—3536—4041 andAbove

3. Respondents’ highest level of Education

Secondary Education Diploma First degree

Masters Degree Others Specify

4. Work Department/Unit

Administration Department [ ] Accounting department [j Finance department [ ] Procurement

department [j Auditing department [] Community members []

5. Length of service (For how long have you been working in the Local Government?)

Less than lyr 1 —5 yrs 6— lOyrs

11—l5yrs 15—2Oyrs2l andAbove

6. Position in the structure

SECTION B: QUESTIONS ON THE SPECIFIC OBJECTIVES

Nature of Local Revenue Sources Existing in the Local Government A: Sources of Revenue

of Wakiso District Local Government

1) What are the main sources of revenue for Wakiso District Local Government? Mention them:

73

a).b) . c)

• d) . e)

•f).

2) How do you rate the level of effective collection of the following sources of revenues (Tick

the appropriate place)

Sources of Revenue Level of Effectiveness

Highly Effective Ineffective Highly

Effective Ineffective

Property Tax

Fish levy

Hotel levy

Vaccination fees

Business licenses

Intoxicating Liquor licenses

Fines

Penalties

Revenue from agricultural and forestry

products

Market fees

Bus stand and car parking

3) What do you think has been done to ensure that above-mentioned sources of revenue are

effectively managed?

74

4) Which category of payers mainly meets the burden of revenue payment in Wakiso district?

Scale of0-5(L)

0-Strongly Agree, 1-Agree, 2-Slightly Agree, 3-Slightly Disagree, Disagree, and Strongly

Disagree

Taxpayer Burden

5 4 3 2 10

General Public

Forest users

Shop Owners

Market vendors

Fishermen

Car owners

Lock up renters

Slaughter houses

People doing Medical examination

General Business

Property owners

5) What is your estimate volume of revenue paid by each of the above payers?

Tick where appropriate (LI)

Tax payer

0,000-250,000 260,000-500,000 510,000-1,000,000

General Public

Forest users

Shop Owners

Market vendors

Fishermen

Car owners

75

Lock up renters

Slaughter houses

People doing Medical examination

General Business

Property owners

6) Which of the following actors are used by Wakiso District Local Government in collecting

revenue? a) Revenue Collection Agents [] b) Wakiso District Local Government Staff [ I c)

Uganda Revenue Authority [ j d) All of the above []7) To what extent do you think these actors are effective in revenue collection? (Tick the

appropriate place)

Sources of Revenue Level of Effectiveness

To a large ‘To some To a Not at all

extent extent small

extent

Revenue Collection Agents

Wakiso District Local Government

Staff

Uganda Revenue Authority

SECTION C

The trends~of local revenues in Wakiso District Local Government in the last 5 years

1. Please tick basing on your level of acceptance with the following reasons for the trend in

revenues collected over the last 3 years;

76

True Uncertain Not True

There is improved local revenue collection due to political

interest and government intervention

Limited knowledge of revenue sources causes decline in local

revenue collection

Corruptive tendency of revenue collectors is a major cause of

revenues declining levels.

Low levels of tax information awareness lead to decline in

revenues collected

Poor attitude of tax payers has led to a reduced revenue

collection

Increased economic activities has led to increase in local

revenue generation

Improvement in collection methods has led to increased local

revenue collections

Contracting out the collection of the taxes has led to an

increase in revenues

General urbanization has led to increased revenue sources

Political influence has negatively affected revenue collections

Grants from Central Government have increased over the

time

Grants from donors have increased over the time

2. To what extent are the following a result of low revenue collection? (Tick the appropriate

place)

Sources of Revenue Level of Effectiveness

To a large To some To a Not at all

extent extent small

77

extent

Delay in completing development projects such

as schools, Health Centers etc,

Under performance of the District Councils

Failure to offer timely social services

Poor social services delivery to the people

Low level of productivity among the local

government employees

Poor road network in the local governments

Increased dependency on Central government

grants

3. Which sectors were mostly affected as a result of low revenue collection? Mention them:

a) Health sector

b) Education sector

c) Infrastru~ture sector

d) Security sector

e) Accountability sector

Section D The Factors Affecting Local Revenue Collection in Wakiso District Local

Government

1. What are the main reasons for the Wakiso District Local Government failure to adequately

manage the mentioned sources of revenue? (Tick ~f it is appropriate)

Reasons for changing revenues collected from revenue sources SA A NS B SD

revenue accessors

Poor planning on revenue management

low awareness on the effective revenue sources

limited use of proper feasibility studies

78

Poor assessment of tax / levy due to clients’ avoidance tricks

2. To what extent do these factors influence revenue collection

Government? (Tick the appropriate place)

at Wakiso District Local

Factors Level of Effectiveness

To a large To some To a Not at all

extent extent small

extent

Productivity

Efficiency

Fare levels

Tax (Revenue) rate

Coerciveness (Enforcement)

3. To what extent do the following factors contribute to the failure of revenue collection? (Tick

the appropriate place)

Factors Level of Effectiveness

To a large To some To a Not at all

The cost of tax collection leads to a reduction in revenues collected

The interference of the local politicians on the local revenue

collections

The high dependence on central government grants / transfers

negative affects local revenue collection

Dishonest of revenue collectors leads to reduced revenues

collected

Lack of enforcement on revenue collection

The tendering of local revenue sources affected the volumes of

revenue collected

79

extent extent small

extent

Poor Financial Records

Lack of enough equipment

Inadequate staff

Resistance to pay revenue

Failure to carry out feasibility study

Failure to notify people on time of their dues

Section E

The Possible Ways of Improving Generation of Local Revenues by Wakiso Local

Government

Measures Taken Level of Effectiveness

To a large To some To a Not at all

extent extent small

extent

Recruitment of qualified staff

Developing adequate plans for revenue

collection

Identifying and introducing new revenue

sources

Carrying out benchmarking studies

Improving relations between the District and the

tax payers

Institutinga computerized system for revenue

collection and reporting

Providing continuous training to tax collectors

80

Monitoring and supervising revenue collectors

Sensitizing the public on the need for the

revenue

F: Give any other general comments on how revenue collections can be improved in the

future.

81

P. 0. Box 3482 wakiso - UgandaEmail: wakiso district local government@gmail.com

Our Ref: WLG/PMC/UV 2019Your Re

Date: l8Tl4July 2019

Dear Sir/Madam;

TO WHOM IT MAY CONCERN

RE: GODFREY JOSEPH

The above named student, who is a bonafide student of Kampala Internationaluniversity pursing a bachelors degree in Business administration (finance andaccounting), third year.

I hereby kindly request you avail him with all the necessary assistance regardinghis research “Legal Framework and local Re~ienue Generation in Wakisomunicipal Council”

Any information shared with him from our organization shall be treated withutmost confidentiality

Please accord the necessary information

Kalyango WilliamAS. TOWN CLERK

only