Local Gov'ts want their share of national budget doubled

Mar 24, 2014

LOCAL Governments (LGs) have impugned the rationale for their current 15% share of national budget, with a report of the ninth Joint Annual Review of Decentralization

By Moses Walubiri

LOCAL Governments (LGs) have impugned the rationale for their current 15% share of national budget, with a report of the ninth Joint Annual Review of Decentralization (JARD) recommending a more than double of the present threshold.

The JARD held late last month was tailored to reviewing policies that have anchored 20 years of Decentralization in Uganda.

The report recommends that government “dedicates not less than 38% of the national budget to LGs,” with the Local Government Finance Commission (LGFC) mooting a raft of new taxes to augment LG revenue base.

The recommendation was revealed during the quarterly meeting for Chief Administrative Officers and Town Clerks at Imperial Royale last Friday.

The development comes at a time when LGFC, a constitutional body mandated to advice the President on matters pertaining to funding of LGs, is calling for a significant increase in the percentage of national budget apportioned to LGs.

In January 2012, LGFC commissioned a study to evaluate financing of LGs, with its report parting curtains on what it labelled the gross under funding of LG structures with the mandate to preside over the welfare of over 70% of Ugandans.

The review was carried out through a critical examination of areas crucial to viable functioning of LGs.

These include inter-governmental fiscal relations, local government annual planning and budget process; procedure of releasing, reporting and accounting for grants and exploring means for improving local revenue.

According to LGFC, central government contributes over 85% of financing to LG budgets, through conditional, unconditional and equalization grants.

However, with government suspending Graduated Tax (GT) in 2001 which was the main source of LGs revenue, LGs have always scratched the bottom of the barrel for revenue to deliver services.

“Several efforts to improve local revenue collections levels have been made but their contributions to the LG budgets has remained low – at less than 3% for districts and slightly higher for urban areas,” the report notes.

According to President of Uganda Local Government Association (ULGA), Fred Ngobi Gume, LGs were collecting an estimated sh60b from GT with taxes introduced to replace GT – Local Service Tax and Local Government Hotel Tax – not generating enough revenue.

LGFC has thus recommended introducing a raft of taxes to help LGs raise revenue including a Residence Tax on permanent residential houses, with a mooted threshold of sh10, 000 to sh30, 000 per year.

The Residence Tax, if implemented, will bring an estimated sh30b to LG coffers, according to LGFC.

Other taxes include a property Service Tax ranging from sh30,000 to sh100,000 and a solid Waste Management Tax for Municipal Councils and Town Councils.

Government has always knocked back demands by LGs to impose a property tax and reinstate GT, with Minister of Local Government, Adolf Mwesige, and recently reaffirming government position of “only taxing income.”

With Uganda’s budget for the 2013/14 financial year at sh12 trillion, sh1.8 trillion is expended on the 112 LGs.

However, the alleged under funding of LGs has remained a challenge, with many of them subsisting on less than 30% of their required staffing levels.

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