Implications in Revenue Mobilization: A Case of Upper Denkyira East Municipal
1.1 Background of Study
Decentralization process has gained
more recognition as the underpinning tool for national democracy and
development. The processes and practices of decentralisation have informed the creation
of local government authorities in defined geographical jurisdictions (Badu,
2007).Every local jurisdiction has its unique historical, economic, social and
physical characteristics which can be explored to bring about development of
the area. Therefore the presence of local government authorities in a given
area is to mobilise resources and provide services that can improve the living
standard of the people and ultimately enhance local governance.
In Ghana, local government areas
are categorised as Metropolitan, Municipal and District Assemblies (MMDAs) with
population as the determinant factor for demarcation. The MMDAs are to partners
with central government in ensuring local level democracy and development.The
implementation of the core mandate of MMDAs has so much to do with how
resources can be mobilised and utilized.
Revenue mobilization has gained
lots of attention in the sphere of decentralisation and local governance.Olowu
andWunsch, (2003) stated that sound revenue system for local governments is an
essential pre-condition for the success of fiscal decentralization, this is so
because, decentralisation requires local authorities to mobilise revenue at the
local level to complement transfers from the central government. The importance
of internally generated revenues even becomes crucial when placed within the
context of inadequate and untimely disbursement of central government transfers
(Bandie, 2003, p. 184).Revenue mobilization is the use of available resources
to harness and assemble revenues that are by law to be paid by citizens,
corporate institutions and quasi-governmental organizations on their operationsin
aneconomic setting.Revenue mobilization also implies that local governments
must be accountable to both central governments and their constituencies on how
the revenue was collected, when it was collected, how and where it was stored
and how and by whom it was used.
By law MMDAs are able to mobilise
revenue through basically two sources that is, from central government
allocation and through internally generated sources. Article 252 of the 1992
Constitution of the Republic of Ghana spells out the modalities of central
government allocation to local government through the District Assemblies
Common Fund (DACF). This fund represents seven percent (7%) of all central
government internally generatedrevenue which is distributed to all the two
hundred and sixteen (216) Metropolitan, Municipal and DistrictAssemblies to
undertake development projects.Article 240 (2) also mandated all MMDAs as
rating authorities and as such should be able to raise revenue in their
jurisdictionsthrough taxes, fees, licenses, permits, loans amongst others(Ayee, 2003).
In other to ensure effective and
streamlined revenue mobilization it should be guided by policy. Critical to any
policy is the formulation and administration processes; formulation of policy deals
with determination and definition of goals, rules and modalities for the
attainment of subject matter in question. The administration on the other hand
deals with the executions of thegoals, rules, and modalities formulated. Though
equally important in revenue mobilization,policy formulation and administration
do not receive equal attention both in theoryand practice.
One major administrative challenge
faced by District Assemblies is their inability to collect fully the revenues
due to them. In most Assemblies, there are huge gaps between reported and
projected revenues. Fjeldstad et al (2003) conclude that this is due to poor
administrative capacity to assess the revenue base, poor administrative
capacity to enforce the taxes, explicit and intentional tax evasion and
resistance from taxpayers, corruption, including embezzlement of revenues by
revenue collector, external pressure on the local finance department to provide
optimistic projections; and political pressure on the local tax administration
to relax on revenue collection.
the decades, MMDAs have been faced with the challenge of mobilizing appropriate
levels of revenue to enable effective service and infrastructure provision to
their constituents. The government of Ghana in its desire to strengthen these
Assemblies in their revenue generation and further deepen fiscal
decentralization, had put in place some reforms as stated in the 2014 and 2015
budget statements respectively in order to address some of these challenges.
These reforms include the need to pay serious attention to local revenue
generation and management by the Metropolitan, Municipal and District
Assemblies (MMDAs) and to explore other financing mechanisms, which would give
local Government authorities greater autonomy from the central Government. It
also included the development of a well-defined policy framework that enables
the expansion of the base of existing MMDA revenue sources, the identification
of new sources of revenue, and the effective administration of collection
systems.While these policies aim at ensuring that these Assemblies generate
enough revenues to undertake their development projects, it is also necessary
to ensure that the right strategies and processes are put in place to generate
these revenues at the local level (GoG,2015).Fundamental issues to be addressed
in the context of Local Government fiscal reforms are the redesign of the
current revenue mobilization structure, the human resource factors (revenue
collectors, how they are recruited) and financial management. Moreover,
measures are required to enhance taxpayers’ compliance and to improve the
accountability of revenue collectors (Fjeldstad, 2004).In Ghana, the District
Assembly staffs that have been placed in charge of revenue mobilisation are
referred to as Revenue Officers. These officers, whose ranks vary from Revenue
Collector to Revenue Superintendent, are located in all the MMDAs in Ghana.
1.2 Problem Statement
The central government allocations
over the years have become inadequate and havenegatively affected the
administrative, social, economic and the infrastructural development of the
Assemblies. This has therefore necessitated the need for Assemblies to pay more
attention to how they can sustainably generate funds within their local area to
meet theirdevelopmental needs.
have attributed the inability of these local government bodies to generate
enough revenues to several reasons. Devas (2003), argued that a growing number
of residents in these local areas live in informal settlements characterized by
inadequate basic services such as housing, clean water, electricity,
sanitation, roads and transport hence the difficulty to generate revenue from
these areas. Others have also attributed this phenomenon to the fact that many
local government authorities are financially weak due to poor tax
administration systems that are unable to properly account for revenues
collected and therefore had to rely on financial transfers and assistance from
the central government (Brosio, 2000; Fjeldstad, 2006).
have recently attributed the lack of transparency in the budgetary processes of
local governments due to their inability to engage citizen’s interest in terms
of their involvement in the entire process of planning and revenue generation
as well as being provided with facilities that are of high quality (CLGF/UNDP,
2014; Adenugba&Ogechi, 2013; Akudugu, 2012). Again, some other scholars are
also of the view that the existence of central government grants was a major
disincentive to mobilize local government revenue (Benin, 2012).
The Upper Denkyira East Municipal
Assembly as one of the District Assemblies in Ghana over the years has faced
similar challenges of revenue generation including the inability to explore
revenue sources, ageing revenue collector, inadequate database on revenue, poor
revenue monitoring and the inappropriate strategies and processes to realize
the actual revenue potentials of the Assembly.
Despite the fact that various
authors have identified the challenges MMDAs face in revenue mobilization there
still exist a gap in the measure put in place to curb the challenge. The policy
for revenue mobilization has not yet been formulated.In the review of relevant
literature, it was observed that very little study has been done regarding the
importance of policy to guide how the District Assemblies mobilize their revenue.
Thus there is a knowledge gap, therefore the study seeks to raises the need on
the adoption of a policy to guide the revenue mobilization process in the MMDAs.
1.3 Objectives of Study
The general objective is to examine
the policy implications in revenue mobilization within the Upper Denkyira East
the study seeks to;
investigate whether revenue
collector understand procedures and guidelines for revenue collection
process in the Upper Denkyira East Municipal Assembly.
examine the factors that affect revenue mobilization at the Upper Denkyira East
examine the attempts made at formulating a policy on revenue mobilization in Upper
Denkyira East Municipal Assembly.
the critical success factors that would enable an effective revenue
mobilization policy in Upper Denkyira East Municipal Assembly.
1.4 Research Questions
The study seeks to answer the
revenue collectors understand procedures and guidelines for revenue collection process
in the Upper Denkyira East Municipal Assembly?
factors affect revenue mobilization at the Upper Denkyira East Municipal
there any attempts made at formulating a policy on revenue mobilization in
Upper Denkyira East Municipal Assembly?
are the critical success factors that would enable an effective revenue
mobilization policy in Upper Denkyira East Municipal Assembly?
1.5 Significance of Study
This study is very significant in
contributing to the enhancement of revenue mobilization of the District
Assemblies in Ghana. Specifically this study’s significance was viewed from the
point of policy, practice and research.
From the policy perspective, this
study may provide national and local policy-makers, as well as development partners,
with meaningful insights into the processes and strategies adopted by local
governments in the mobilization of revenue. In addition, the study may provide
broad guidelines for policy makers at both national and local levels of
government to facilitate the mainstreaming of effective budgeting and revenue
mobilization policies into national and local plans.
In relation to this study’s
contribution to practice, it proposed ways to enable District Assemblies and
agencies within the country to incorporate best practices of revenue mobilization
at the local level. Finding from the study would provide useful lessons that
would enable District Assemblies adjust their revenue mobilization strategy and
approach taking into consideration the various local conditions.
regards to the significance of this study to research, the findings from the
study may provide empirically verifiable data and information on the processes
and strategies adopted by the local governments towards a policy on revenue
mobilization in the context of the Upper Denkyira East Municipal Assembly and other
District Assemblies in Ghana. It is also expected that the study will generate
issues for further research on revenue mobilization policy issues.
1.6 Scope and Limitation of Study
of the study is focused around challenges and issues of revenue mobilization in
the Upper Denkyira East Municipal Assembly in Ghana.Theoretically, the study
focused on administrative and fiscal decentralisation.
limitation of the study is that finding literary works on
revenue mobilization policy in Ghana was a challenge. Lessons therefore had to
be drawn from documentation from developed and developing countries where
policies and issues concerning revenue mobilization has been implemented over a
Another major setback the researcher anticipates is time constraint, as
the respondents may not want to spend so much time filling questionnaires. More
so the unwillingness of policy think tanks to provide the relevant information
needed for the study because of the complexities of the contexts and situations unique to the policy there were bound to be problems in the data collection.
1.7 Organization of Study
The study will be presented in five
one will present the background of the study, statement of the problem,
objectives, research questions, significance, scope and limitations of the
Two will reviews relevant literature, both theoretical and empirical; this is
to ensure familiarity with the existing body of knowledge, position the study
in a conceptual framework and to find out contributions to make to the existing
Three will discuss the methodology. The procedures and methods used in
gathering both primary and secondary data in order to achieve the objectives
set. The population, data collection tools and procedure, as well as the
analysis of data based on which to draw conclusion of the study.
Four will present the data analysis, the interpretation of results, as well as
discussion of the findings. It establishes the extent to which the theories
propose and empirical finding relate to practice.
Five contains the summary of the study, relevant and informed conclusions, and recommendations for key stakeholders and
Institutions as well as for future research.
Finally, the reference list of material used and appendix which comprises of
the sample questionnaires and interview guide, and other relevant document will
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Lynne Rienner Publishers, Londo