receipt of a standard form to the taxpayer, a copy of which is retained by his superiors to be audited. An examination of budgeted versus actual figures for several years in Kibaha and Kilosa District Councils, indicates that these two sets of figures bear little resemblance to each other. Problems of revenue collection include: councils’ inability to realize fully the revenue due to them; inadequate capacity (shortages of staff, lack of reliable transport); resistance from tax payers; corruption; political pressure (councilors tend to be reluctant to raise taxes or enforce the tax law for fear of losing popularity); and negligence by government
43 institutions, parastatals and co-operative unions with regard to submitting the taxes and charges they owe to local authorities. 3. Options for reform – this local tax system is partly a result of poor administrative capacity for tax collection and tax design, political pressure and lack of co-ordination between the local and central government. The two authors identify three major reform options: (i). Tax compliance and service delivery – there is a widespread discontent among people regarding their terms of trade with the government. People’s tax resistance seems to be correlated to deteriorating public services. It might be argued that individuals pay taxes because they value the goods provided by the government, recognizing that their payments are necessary both to help finance the goods and services and to get others to contribute (Alm et al, 1992:313). (ii). Redesigning the current revenue structure - in redesigning the tax structure; options to be considered are the abolishment of unsatisfactory local taxes; improvements to remaining revenue bases; and cost recovery through user fees. (iii). Intergovernmental fiscal transfers – the basic rationale for a system of transfers is the existence of a fiscal gap at the local government level arising out of own-revenue and own-expenditure assignments (Ahmad, 1997). Promoting fiscal responsibility at the local government level calls for implementation of a stable and transparent system of transfers from the central government to the local authorities, geared to filling any ex-ante gap between the assigned spending and revenue-raising responsibilities of the latter (Ter-Minnasian, 1999:57). Stability and transparency considerations call for formula-based revenue-sharing and other general purpose transfer systems, yet in this process of fiscal decentralization, it is important to be aware of the risks for macroeconomic management and fiscal discipline. Finally, it is equally important to identify and distinguish
44 between revenue sharing and grants as being among methods that may be used to close the fiscal imbalances of local authorities.
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