Determinants of local revenue collection in Mpigi District

Abstract

This study was carried out in Mpigi District to investigate the determinants of local revenue collection in the district. Local revenue is among the sources of revenue used by the district to deliver services to the masses. Other sources are Central government transfers and donor funds. Low local revenue collection is a major challenge to the decentralization policy and this study was carried out to investigate the determinants of local revenue collection and to provide suggestions for improved methods of revenue collection and management. The study covered a total of 170 respondents whereby 150 taxpayers and 20 tax administrators constituted the sample drawn from two subcounties (Mpenja and Mpigi town council).

The methods used for data collection included questionnaires, personal interviews, focus group discussions and review of financial documents. Data derived from questionnaires was analyzed using SPSS (Statistical Package for Social Scientists). The findings are presented in frequency distribution tables and figures.

The findings reveal that the factors determining local revenue collection in Mpigi district are; inefficiencies in tax enumeration and assessment, poor management of tax registers, lack of awareness on tax regulations and obligations among taxpayers, low incomes of taxpayers, political interference in tax administration exercises and bribery. These factors were ranked using the pair-wise ranking method and results revealed that political interference ranked highest and inefficiencies in tax enumeration and assessment ranked lowest. Results from testing of hypotheses also confirmed that inefficiencies in tax enumeration and assessment and lack of awareness on tax regulations and obligations among taxpayers affected local revenue collection.

Based on the findings it is recommended that to improve local revenue collection the district should improve tax administration by improving its tax registration process, strengthening tax assessment mechanism, step up the sensitization efforts account for taxes collected and strengthen incomes of the citizens. The district should also institute mechanisms for raising awareness of political leaders on revenue collection systems.