Framework for a Strategy of UP Revenue/Resource Mobilisation ...

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o) A record should be maintained of payments of business tax / licences against each business in the register (as pro-forma will be developed). This will show clearly which businesses have not paid for the current year. Where a business has not applied for a licence by the due date (say, 30 th September), the collector should visit the business and require payment. If no payment is forthcoming, the steps outlined above in (k), (l) and (m) should be adopted. The ultimate sanction would be to close the business. p) Where possible, follow-up action in relation to a business tax / licence should be integrated with action to recover holding tax from the same property, so as not to duplicate effort. q) Simple computerised spread-sheets can help improve revenue performance, by tabulating clearly assessments, arrears, payments and outstanding balances. Cross-checks can easily be made and the list of defaulters can be produced. However, UP require someone with knowledge of computers, and preferably more than one person, to reduce the scope for fraud by the system manager. Automatic checks should be built into the software to prevent fraudulent transactions. Also, paper copies of all records should be maintained to reduce the risk of loss of data through system failure or data corruption. r) Overall performance of revenue collection can be motivated by the inclusion in any grant system (including the LGSP-LIC grant allocations) of a performance indicator or indicators based on revenue performance. One indicator might be that the UP has compiled a holding tax assessment register and a business tax/licence register in the approved form. Another indicator might be performance of collection against assessment (i.e. effectiveness – what proportion of the assessed tax has been collected). An alternative indicator might be the percentage increase in tax revenue. 16 In addition, there might be competitions between UPs within a district to see which could collect the highest proportion of assessed tax with small rewards for the Chairman, elected members and officials of the best performing UP. VI. Rationale and Challenges of UP Revenue Strategy This is an opportune moment to be proposing improvements for enhancing UP revenues, for a number of reasons. Firstly, the Committee for Accelerating and Strengthening Local Government reported in November 2007. Among its recommendations, it identified the revenue sources of UPs which are given below 17 : � ensuring that local tax assessments are updated every five years; � improving revenue collection performance of local governments; 16 The indicator should not be the total amount collected, since that would favour UPs with greater revenue potential. 17 This list is based on the English language summary of the Committee’s report. 17
� increasing UPs’ share of the Land Transfer Tax from 1% to 2%, and ensuring that the money from this source is passed on to UPs; � giving UPs a 3% share of the Land Development Tax; � reviewing the distribution of revenues from leases on huts and bazaars to ensure a fairer distribution; � giving local governments more discretion about local tax rates; � increasing the share of ADP (annual development program grant) for local government (as a whole) to 10% of the national budget; � Apportioning to local government a share of national taxes collected locally. Secondly, the Government has recently promulgated a new Local Government (Union Parishad) Act, 2009, to replace the 2003 Ordinance. This takes account of many of the recommendations of the Local Government Committee. It is reported that it will be followed by a revision to the Model Tax Schedule for UPs, very soon. Thus, the present study can provide a direct input into that process. Thirdly, Government has shown its support for UPs by channelling some block grant allocations directly to UPs, starting from 2004. This has enabled UPs to have greater choice and control over resources used locally. In addition, from 2008, substantial funds are being channelled through UPs in poorer regions of the country for rural works programmes to reduce poverty. Fourthly, the LGSP is channelling substantial resources to UPs. This programme started in 2007 in 1,050 UPs, and will gradually extend to all UPs (at least, those UPs which meet minimum performance qualifications). LGSP builds on the earlier experience of the Sirajganj Local Government Development Programme which, among other things, was successful in increasing local revenues in a number of UPs. As part of LGSP, the Learning and Innovation Component (LIC), funded by UNDP, UNCDF, EC and DANIDA, is developing and disseminating good practices and innovations to UPs in six districts. Under this component, there is scope for pilot projects in a number of UPs to experiment with revenue enhancing reforms. This strategy provides suggestions for what could be included in these pilots. VII. Purpose and Objective of the Strategy The traditional, theoretical argument for decentralization and local government is about matching the expenditure on local services that benefit the residents of a jurisdiction with the willingness of residents to pay taxes to finance those services. Thus, the key political choice for a local 18
Page 1 and 2: Local Governance Support Project- L
Page 3 and 4: ABBREVIATIONS AND ACRONYMS ADP Annu
Page 5 and 6: feed these “second generation”
Page 7 and 8: III. Legal Status of UPs Revenue Mo
Page 9 and 10: � Regular transfers from central
Page 11 and 12: official formula. 6 However, in man
Page 13 and 14: at the ceiling rate of Taka 500, in
Page 15 and 16: Table 1: Holding Tax Assessment Pil
Page 17 and 18: It should be pointed out that there
Page 19: probably be paid more than the 15%
Page 23 and 24: e. Fifth UP will be selected where
Page 25 and 26: about the level of business taxes,
Page 27 and 28: � Policy Advocacy a. Policy advoc
Page 29 and 30: Ups’ self sufficiency and better
Page 31 and 32: Tax Schedule, 2003 to at least refl
Page 33 and 34: 5. Motivation and Incentive system
Page 36 and 37: Annex- 2 : Holding Tax Assessment R

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