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

feed these “second generation” innovations into the national LGSP. The Learning and Innovation
Component (LIC) is being implemented in six different pilot districts, Barguna, Feni, Habiganj,
Narshingdi, Satkhira and Sirajganj, one from each of the six administrative divisions of the country.
388 unions under these districts will be covered progressively over the five year duration of the
project. The total budget of the project is US$ 18.118 millions and funded by UNDP, UNCDF, EC
and DANIDA.
During 2007-08, LGSP-LIC commissioned a study and some analytical work on UP own-source
revenues was conducted. 1 This was aimed at gaining a better understanding of local government
taxation and revenue collection procedures, processes, constraints, and the scope for increasing such
own-source revenues. The study identified the rationale for piloting improvements in UP own-
source revenue collection. Firstly, the fiscal resources generated by UP own-source revenues are
almost entirely discretionary in nature – UPs can use their tax and other revenues to finance
anything for which they have a legally-prescribed mandate. This provides UPs with the opportunity
to fund expenditures which are otherwise excluded by block grants (e.g. additional part-time staff,
maintenance costs, etc.). Secondly, a key indicator of the extent to which UPs are seen by local
citizens to be providing appropriate public goods and services is (to a very large extent) how far
they are able to mobilise own-source revenues. Paying taxes is largely a function of voluntary
compliance on the part of tax-payers – and that will usually reflect public satisfaction with UP
performance.
II. The Institutional Context
The Government’s commitment to improving local UP revenue is set forth in the National Strategy
for Accelerated Poverty Reduction (NSAPR, Bangladesh’s PRSP). Indeed, the NSAPR identifies
local UP revenue as one of eight priorities in the medium term strategic agenda for Bangladesh. It
recognizes the need for simultaneously pursuing the agendas of political and functional
decentralization, putting the emphasis on partnership between local government bodies and other
local actors, and, projecting the importance of newer agendas of decentralized service-delivery and
promotion of local economies. The focus is not only on local governments as project implementing
bodies but on local UP revenue as a political and institutional process which can contribute to the
required scaling up of the rate of poverty reduction through more effective resource mobilization
and enhanced development choices available at local level and better inclusion of all social groups
in these choices. The NSAPR also recognizes the importance of linking union parishads to critical
1 See Nick Devas (July 2007): Local Revenue Sources for Union Parishads: Report of a Study; and Nick Devas
(September 2008): Enhancing Revenue Sources for Union Parishads
2