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Stefan Leiderer et al. Ceded revenue Ceded revenues are non-tax revenues collected by various government agencies on behalf of the central government that should partly be transferred back to local authorities. The non-tax revenues to be ceded to the local governments include toll fees; gambling and casino fees; fuel levy/fee (road maintenance levy); motor vehicle registration fees; and industrial registration fees (GFA 2005, 50). However, ceded revenues are currently not redistributed to Local Assemblies (Decentralisation Secretariat 1998, 12; Decentralisation Secretariat 2005,5) as the institutional mechanisms, the legislative procedures, budgeting processes and the revenue distribution mechanisms are yet to be established (GFA 2005, 51). Therefore, for the time being, ceded revenues do not play any relevant role for local revenue mobilisation. Local revenue generation Locally generated revenues mainly consist of ground rents, fees and service charges, user fees, business and occupational licences, income from commercial undertakings, property rates, and interest on monies invested by local government (Decentralisation Secretariat 1998, 11; Decentralisation Secretariat 2005, 1). According to Section 49 of the 1998 Local Government Act, DAs may also borrow money for some commercial activities but need the approval of the NLGFC (Republic of Malawi 2001, 51). Local revenue generation is generally low because the available sources of revenue have low yield, are difficult to collect and are not sufficient to make a meaningful contribution to administrative costs of local government, let alone for investment for development (GFA 2005, 50 et seq.). 30 In particular, while legally entitled to collect property taxes, rural districts in Malawi are currently not able to do so as there is no database of rateable properties in rural assemblies, and no system or capacity for valuing these rateable properties exists. 31 Other fees, such as market fees, are frequently not collected for 30 Annex 3 gives a more detailed overview of sources of local revenue generation available to rural districts. 31 This problem is somewhat less serious for urban assemblies as property rates and business licences are easier to collect in towns and cities than in rural districts (see Box 14). The key precondition to be able to raise property tax, of course, is the ability to value property / rate areas within a jurisdiction. The time consuming and expensive task of rating properties requires capacity in terms of manpower and knowledge. 104 German Development Institute
Public Financial Management for PRSP Implementation in Malawi the simple reason that staff supervising the collection of market fees lack means of transport to access market places. Box 14: Revenue Generation in Urban Districts With regard to revenue generation, cities and municipalities are in a clearly better position than towns and rural districts. There are two main reasons for this: First, Malawi’s three cities, its municipality, and even its towns, benefit from better infrastructure and conditions than rural districts, facilitating most kinds of economic activities.. Consequently, companies and market places, such as Malawi’s largest market, located in Zomba municipality, are more often found in urban areas than in villages of rural districts. This also brings more diverse and wealthier segments of population to the cities, increasing the potential for tax revenues. Thus, cities benefit from a much broader tax basis than rural districts. Second, most property in cities is rated and registered, enabling the administration to collect significant amounts of revenue from property taxes. In Lilongwe City, property rates alone make up 85 percent of its total income, including other tax income and GRF transfers from central government. Even in small towns such as Dedza Town, and Mangochi Town, property rates account for 58 percent and 34 percent of total income respectively. Therefore, urban districts are far less dependent on external sources of money. For example, in the case of Lilongwe City payments from GRF account for only 0.8 percent of the city’s total income. No direct conclusion can be drawn as to whether cities manage their development planning and public finances better than rural districts. Nevertheless, the city assemblies are much more independent in PFM issues than their rural counterparts. In consequence, planning procedures are less likely to be undermined by parallel planning procedures of external funding mechanisms. In addition, delays in central government resource allocations and transfers do not harm planning and budget execution to the same extent they affect rural districts. This contributes to to more certainty and own responsibility of PFM procedures. Note: Urban districts refers to Malawi’s three major cities (Lilongwe; Blantyre; Mzuzu); one municipality (Zomba); and eight towns (Balaka; Dedza; Karonga; Kasungu; Liwonde; Luchenza; Mangochi; Salima). German Development Institute 105
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Studies Deutsches Institut für Ent
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Preface The present study on ‘Pub
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4 The Case of Malawi 44 4.1 Why Mal
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Bibliography 151 Annexes 157 Tables
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Boxes and Tables in the Annexes Box
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DS EHP ESAF EU GBS GDP GoM GRF GTZ
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TOR UDF UNCDF UNDP UNV USAID VAP VD
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