LOCAL REVENUE

GENERATION IN UGANDA
The Case of LGs

By Sserwadda Tamuzadde

Consultant
Tel 0772979303
Email:-mtsserwadda@yahoo.com
 Revenue Mobilisation in LGs:
Course Objectives
• To identify the major sources of LG revenue.

• Understand the importance of each revenue source.

• Understand the legal framework governing revenue

mobilization.
 Cont.

• To describe the procedures for revenue

assessment, collection, banking, etc.

• To explain the roles of the Stakeholders

involved in mobilization of revenue.

 Cont.

• To identify best practices in revenue

mobilization.

• Mobilize revenue from donors.

 Introduction-Background
• The Government of Uganda’s decentralization
policy outlined in Chapter 11 of the Constitution
devolved planning and fiscal powers to Local
Governments, and operationalised by Local
Government Act.243 .
• Fiscal powers include the power to levy, charge,
collect and appropriate fees and taxes including
rates ,rents, royalties, stamp duties, registration
and licensing.
 Introduction Cont
• Article 191 of the Constitution of Uganda
empowers Local Governments to
levy,charge,collect and appropriate fees
and taxes in accordance with any law
enacted by Parliament.
Theoretical Aspects of Revenue
Mobilisation

What is LG Revenue ?
Revenue is income collected and received
by a Local Government.
Broadly, local revenues come from taxes,
administrative/ user fee licenses, and
property income.
Local Governments collect, record, control and
account for revenue.

Local Governments finance their development

projects, pay salaries, allowances and other
costs.
 Cont.
Types of LGs revenue:

• Grants from Central Government

categorized into conditional, unconditional
and equalization grants.

• Local revenue as detailed below.

• Grants from donors like DANIDA,EU etc

 Tax Revenue
• Definition
• A Compulsory levy payable by an
economic unit to the government without
any corresponding entitlement to receive a
definite and direct quid pro quo from the
government.
• It is not a price paid by the tax payer for
any definite service rendered or
commodity supplied by the government.
 Cont’d
• Tax Revenue include the following:-
• Trade license fees
• Liquor license fees
• Property rates
• Charcoal Burning Licenses
• Annual Bicycle Licenses
• Local Service Tax
• Hotel tax,etc
 NON TAX REVENUE
• Example
• Administrative fees and User charges
• Market charges
• Park fees
• Public convenience charges
• Advertising/ billboards
• Slaughter fees
• Registration fees
• Refuse collection charges,etc
 Sources of Local Revenue:
• Local service tax (LST);
• Local Government Hotel tax
• Property rates
• Fees;
• Rents;
• Interest;
• Charges;
• Cess on produce etc.
 Cont.
• Main activities of Revenue Mobilization
• Registration-Identification and listing of tax
payers.
• Enumeration- Recording all sources of
income for an individual tax payer.
• Assessment-Recording all income sources
for each tax payer on an assessment form.
 Cont’d
• Collection-collection of revenue from tax
payers
• Sensitization and Publicity-Involves
holding workshops and seminars for
revenue collectors and tax payers and
other forms of awareness campaigns on
the importance of paying taxes ,radio
announcements, advertising,drama etc
 Cont’d
• Enforcement-Following up tax defaulters,
regular checks on licenses etc
 General Considerations in
Revenue Mobilization
• Adequacy-identified revenue sources
should be capable of yielding substantial
revenue .
• Elasticity-local revenue sources should be
capable of yielding additional revenues to
respond to increasing demands for
services from the community.
 ctd
• Equity-equity means fairness. Taxes
should be based on ability to pay by each
taxpayer.
• Administrative Capacity-The costs, effort
and time involved in administering a
particular revenue source should not be
more than revenue collected.
 ctd
• Political Acceptability-Some revenue
sources are very unpopular. In general
indirect taxes are less sensitive.
• Economic Impact-Some taxes, charges or
fees may negatively affect the propensity
of taxpayers to work, save, consume or
invest
 The Legal Aspects of Revenue
Mobilisation

Revenue Mobilisation Powers:

• Article 152 of the Constitution;

• Article 191 of the Constitution;

• Local Governments Act cap 243;section 80

• Local governments (financial and
accounting regulations, 2007);provides
regulations regarding financial
administration and control ;budgeting,
revenue, payments assets management,
,risk management etc.
• Public procurement and disposal of
public assets Act, 2003.
This act guides local government in
contracting out their revenue
administration functions.
Local Government(PPDA) Regulations,2006
give detailed procurement and disposal
practices ,processes and contract
management ,tendering of local revenue
administration functions.
 Cont.
• The market Act
• This law provides for the administration and
management of markets in Uganda
• . It deals with issues such as the
establishment and control of markets, rules
and byelaws applicable to the markets
• Offences and penalties for contravening the
Act, etc
 Cont.
• The local government rating Act 2005.

This Act provides for the levy of rates on

property by LGs within their areas of
jurisdiction, valuation of property for the.
purpose of rating.
 Cont.
• The Trade Licensing Act, Cap 101;

This law deals with regulation regarding

declaration of trading centres ,trade
licensing ,hawkers’ licenses, travelling
wholesaler’s licenses and general issues
in respect of trade licensing.
 ctd
• See Press Release on the Revised Trade
Licenses Rates.
• Public Health Act;Cap.269,

The Public Health Act consolidates the law regarding

preservation of public Health. Section 58 of the Act,
provides for local governments to take all lawful
necessary and reasonable measures for preventing
or causing to be prevented or remedied all conditions
liable to be injurious or dangerous to health arising
from the erection or occupation of unhealthy
dwellings.
• .
 Hotels Act Cap.90
• This Act consolidates the law related to
hotels . It provides for the licensing of
hotels, the conditions to be met before a
license is issued etc
 Tourist Agents(Licensing) Act
Cap.100
• This Act provides for the licensing
,regulating, and controlling the business of
tourist agents.
 Enguli
(Manufactures&Lisensing)Act,
cap 86
• This Act regulates the manufacture,
licensing and sale of Enguli in Uganda.
 Liquor Act cap 93
• This makes provision for regulating the
manufacture and sale of intoxicating liquor
• It lays down the different licenses which
can be issued in respect of liquor, the
hours of sale, etc
 Stage Plays and Public
Entertainment Act,cap.49
• This is the authority for Local
Governments to license stage plays
,public entertainment,etc
 The Fish Act cap197
• The LGs Act provides for fishing licence
fees as one source LG revenue sources
• The Authority for charging and collecting
fishing licences is the fish Act
 The Mining Act,2003
• LGs may levy, charge and collect royalties
as per section 80 of LG Act.
The Petroleum Supply Act,2003
• This Act provides for the licensing and
control of activities in Petroleum supply
operations and installations, and provides
for the Trading (licensing) Act,1969 to
cease to apply to the issue permits and
licenses in respect of petroleum products
 Cattle trader’s Act cap.224
• This Act provides for the regulation of
cattle trading within Uganda.
• Valid license issued by veterinary officer in
the prescribed form is required before
carrying out cattle trade.
 Roles and responsibilities of
different Stakeholders in Revenue
Mobilisation
The Stakeholders in Local Governments revenue mobilization
are:
• Ministry of local government

Guidance ,

inspection ,

monitoring and

Coordination of LGs to ensure compliance with law.

Roles and Responsibilities Cont
• Ministry of justice and Constitutional affairs
• District and Municipal Councils may enact
ordinances and byelaws respectively
regarding local revenue administration
issues
• The local bills passed have to be forwarded
to the Attorney General through the minister
of Local Governments to verify and certify
that they are not
 Roles cont’d
• Inconsistent with the Constitution or any
other law.
• Ministry of finance planning and economic
development.
 Custodian of Tax policy

 The roles and objectives of the tax policy are- initiating,

evolving and formulating tax policies to achieve economic
policy goals and objectives and raise domestic revenue to
finance government budget.
 Identify new avenues of widening the tax base.

 Coordinating organizations like bank of Uganda, Uganda

investment authority UIA and private sector foundation etc
 on taxation matters.
 ctd
• Evaluating and advising on the impact of
tax policy on the taxpayer and the
economy
• Identifying new avenues of widening the
tax base
• Drawing up appropriate legal requirements
for revenue collection and related
legislation.
• Local government finance commission

Article 194 of the constitution provides for

its establishment .

Its duties include considering and

recommending to the president potential
sources of revenue for local governments,
advising local government on appropriate
tax levels to be levied by local government
• Council

Exercises general control over public revenues

of the council in accordance with the law.

• District/urban council committees

Initiate and formulate policies and projects e.g.

revenue enhancement plan/ policies for
consideration and approval by council.
 Con’t
 Exercise general supervision and control over
the council’s revenue administration and
accounting system.

 Monitor the implementation of policies and

projects approved by council.
• Standing committees
 Reviewing finance related bills for ordinance of
byelaws.
 Monthly revenue and expenditure returns
 Contract committee reports

• Chief Executives;
• Head of finance
• Head of internal audit

• Revenue Collectors and Cashiers;

• Ta x /rate payers
The roles of tax/rate payers include but not
limited to abiding with the provisions of the
relevant laws and regulations regarding
locally generated revenues, including
monitoring and reporting tax defaulters ,
corrupt tax administrators , etc
 ENUMERATION AND
REGISTRATION

• Physical identification, counting and recording

of all items of interest in respect of taxable
sources of revenue in a particular area
• The business register contains details
such as taxpayer/business name and full
address, village, parish, sub-county,
county,

• Nature of business, year of

commencement, nature of ownership,
estimated stock and annual turnover
 Rationale for enumeration
• It is important that LGs have a clear
knowledge of economic affairs including the
current and potential revenue sources
• Enumeration and registration forms the basis
setting reserve prices ,revenue collection
targets and performance measurement
• The information generated aids in planning
,and helps LGs to make realistic
interventions ,plans and estimates of
revenue and expenditure
 Setting up an enumeration and
registration committee
• It is important that a well constituted team
of at least five senior staff from finance
and other revenue generating departments
is set up by the Chief Executive of district
or Urban Council to spearhead the
carrying out of the enumeration and
registration exercise.
 ASSESSMENT
• This is the determination of the amount to
be paid in respect of a particular revenue
item, and raising of the formal notification
of the amount to be paid.

• The due date, and mode of payment

• Identification of assessors/Assessment
committee.
• Training assessors.
 Con’t
• Raising and issuing the assessment
• Assessment form
• Assessment registers
• Objections
• Tax appeals tribunals
 COLLECTION
• Collection function aims to have fully collected
by the due date all revenues assessed in
different revenue items.

• It also aims to charge and collect penalties and

fine for late payment .
Revenue collection registers

Revenue Collectors

Collection Targets

Enforcements, verbal and written reminders

charging interests and fines etc before taking
action to prosecute or recovery measures .
 Revenue Coding
• Coding is an accounting tool used to identify
particular items of revenue , expenditure,
assets and liabilities with common features .
 Revenue enhancement plan
• Revenue enhancement plans should be
separately developed in line with and
integrated into local government’s plan
 Administration Fees and user
charges
• Market/Gate charges
• Park Fees
 Market /Gate Charges
• Market and gate charges are the prices paid to
access and make use of market facilities. They
include market gate charges, rental fees, and
other charges for market stalls, kiosks and lock
ups ; etc.
• Though they are compulsory ,market charges
are not taxes as there is a definite and direct
quid pro quo upon their payment which is
having access to and using the market facilities
 Park fees
• These are fees paid in order to get access
to and use of the parking facility by a local
Government .
• Park fees including loading , parking and
entry fees
 Contracting out local revenue
administration
• Local government may contract out to private
service providers the administration of local
revenue sources such as collection of taxes
and fees.
• Management of markets and parks
 BEST PRACTICES IN
REVENUE MOBILISATION
• Sensitization of Taxpayers
• Establishment of Tax tribunals
• Hold technical workshops
• Public Rallies by Leaders
• Dissemination of information about tax
payments
• Effective service delivery
• Contracting out revenue collection
 ctd
• Accountability and transparency
• Adherence to local government
regulations.
• Management
 ctd
• The Process of implementing Best
practices must be highly participatory and
should ultimately seek to ensure that the
best practices are incorporated into LG
Planning and Budgeting process.
 Group work
• LGs are experiencing problems in generating
enough revenue to implement their programs
or projects.
• (i) You are required to propose strategies to
improve revenue generation in LGs.
• (ii) what challenges are expected in revenue
mobilization in LGs
• (iii)Propose strategies to overcome the
challenges in revenue mobilization in LGs