Technical Note
ENHANCED RESOURCE MOBILISATION IN LOCAL GOVERNMENTS: A STUDY OF DISTRICTS KASUR AND LODHRAN
INDUSTRY :-
AREA :DEVOLUTION & GOVERNANCE
ORGANIZATION :-
LENGTH :36
LUMS No :20-004-2006-2
PUBLICATION YEAR : 2006
ABSTRACT:
The ability of Local Governments (LGs) to meet a substantial proportion of their development and non-development expense from Own Source Revenue (OSR) is critical for the success of the devolution experience in Pakistan. A case study of Districts Kasur and Lodhran was conducted to examine the legal and fiscal regime governing generation of OSR by LGs. Business processes were examined and data was collected for each tax, rate or fee in respect of the two District Governments (DGs) and the six Tehsil Municipal Administrations (TMAs). Analysis of the data collected and intensive interaction with a range of stakeholders show that the DGs and the TMAs in the devolved set up continue to be heavily dependent upon Federal and Provincial grants and transfers for the development and non-development expenditure. In 2004-05, OSR constituted a mere 2 percent and less than 10 percent of the budget for the DGs and the TMAs respectively. The data also shows that the TMAs have a relatively buoyant tax base as compared to the DGs. A number of interesting findings emerge from the qualitative and quantitative data: (1) legal confusions and lacunas cause loss of revenue; (2) LGs have limited autonomy to set their own tax rates; (3) there is limited possibility of introducing new taxes, rates or fees; (4) there is vast potential to improve collection efficiency; (5) improvement in service delivery is a pre-requisite for increasing user charges; (6) comprehensive mapping and development of data bases can broaden the tax base; (7) certain taxes or fees can be abolished with negligible OSR loss; and (8) significant capacity gaps exist at the local level. Intensive stakeholder interaction also generated a set of useful and specific recommendations. These mainly pertain to removal of legal confusions and lacunas, improvement in business processes and enhancing capacities at the DG and TMA level.