GOLD Report I - UCLG

AFRICA36 United Cities and Local Governmentsconditional or unconditional grants, and othertypes of state financial contributions. Thespecific method of funding local developmentvaries from country to country. The capacityto mobilize “own revenues” is one of the fundamentalprinciples of decentralization.III.2.1. Local resource mobilizationLegislation allows African local governmentsto raise a panoply of resources intheir own territory from direct or indirectlocal tax revenues, service tax, feescollected from the operation of services,economic activities or municipal assetmanagement. Unfortunately, the lawdoes not always list the necessary localgovernment taxing powers to alter thevolume of their revenues; which meansthat municipal incomes generally regardedas “own resources” are in fact controlledby central government.This imbalance can be seen most clearly inthe numerous countries that apply theFrench administrative model, where, intheory, there is a more diversified localtaxation system, yet in practice, localgovernments remain devoid of taxingpowers, as tax rates are set out in the lawor imposed by central government. Localgovernments do not administer local taxationsystems as such, rather they dependon taxes transferred from the state, whichin some cases have become state-sharedtaxes (e.g. Côte d’Ivoire, Cameroon). Thetaxing powers of local governments inGabon, Niger and Togo are the exceptionto this tendency. Except for local governmentsin Senegal, local governments arealso not empowered to set service fees andtariffs. Only in exceptional instances canlocal governments collect duties on certainlocal services or activities (as in Togo, forexample) with the prior approval of theoverseeing state authority.Local governments in anglophone countriesgenerally enjoy broader taxing powers andgreater freedom to set service rates andother indirect local tariffs; such as real estatetax in Ghana, South Africa, Tanzania,Zambia and Zimbabwe, and service fees inthe afore-mentioned countries and Nigeria.Nonetheless, local taxation in some countriesis negligible (e.g. Nigeria and Uganda,where tax revenue as a percentage of totalrevenue dropped from 30% to 11% in fiveyears after the removal of the more productive“graduated tax”). Local governmentpowers to create indirect duties or tariffs onlocal activities are also exceptional (e.g. inZambia and Mozambique). It is however,necessary to relativize the importance ofthese local taxing powers, bearing in mindthe decisive control of central governmentsover revenue mobilization (such as the priorapproval required for rates and tariffs inZambia), the low levels of own source revenues(see the case of Ghana in Graph 1) andthe percentage of own revenues making upa small share of the whole budget (30% onaverage, except in Zambia –77%– andSouth Africa -90%-).The level of government responsible forcollecting the revenues also varies betweencountries: in some locations themunicipalities ensure the collection oftaxes, while in others the state collectsthe taxes and later distributes the revenuesamong local governments. Africanfrancophone tax revenue systems aregenerally centralized, although someduties may be collected locally (e.g. Mali,Morocco, Senegal) and some countriesmay present certain exceptions to thisrule (as is the case in Tunisia for thecollection of certain taxes). However,regardless of the system in place the taxcollection rates remain low in all thecountries: approximately 50% in Kenya;lower still in Nigeria; 20% of real estatetaxes in Tunisia (collected at the locallevel); and between 45-50% on averagein Côte d’Ivoire or Níger (where the stateensures the collection of revenues).The use of a shared tax system is slowlyspreading as the main source of localgovernment budget funding. Value AddedTax (VAT) is a major component of shared