Local Revenue Mobilization Initiative. LMRI overall goal. Overall Training objectives. 23-Jun-15

Transcription

1 Local Revenue Mobilization Initiative Local Revenues Concept and Legal Framework Session one 1 LMRI overall goal To improve revenue generation at the local level a more effective and efficient revenue administration promote better service delivery and local development Enhance prospects for peace and security Which will result into success for decentralization policy since Revenue is a critical factor 2 Overall Training objectives Linking revenues to service delivery Development of common home grown solutions to evident revenue mobilization challenges Development of LRMP and R-MAP for more sustainable local revenues Improving staff performance 3 1

2 Session objectives To discuss and understand the meaning of local revenues To be to explain the rational for revenue mobilization To identify relevant clauses in the law relating to local revenue To describe the main types of revenues To discuss the main considerations in levying revenues from different sources To review the current tariff structure To identify new revenue sources 4 Coverage and discussion issues 1. Local revenue mobilization 2. What is local revenue? [OSRs] 3. Rationale for revenue mobilization 4. Tariff structure and new revenue sources 5. OSRS mobilization policy considerations 6. OSRs Performance 7. Stakeholder roles and responsibilities 8. Downward accountability and transparency 5 LOCAL REVENUE MOBILIZATION CONCEPT Local revenue mobilization involves obtaining resources from communities through taxation and other non-tax measures such as user charges and fees. Taxes are compulsory non quid pro quo- no direct benefit to the tax payer, the benefit is a public interest Charges are based on the marginal cost of delivery of a service, Service delivered are paid for e.g. Collection of garbage, use of abattoir to slaughter of animals, entrance in a stadium 6 2

3 LOCAL REVENUE MOBILIZATION CONCEPT Social accountability however, requires that revenue mobilization has a functional relationship with service delivery Communities are likely to be willing to buy the concept if there is service visibility and a significant linkage to quality and quantity of desired service delivered 7 What is Local revenue? -OSRs Revenue has the same meaning as income OSR is income for the LG assessed, collected and received by a LG from within its jurisdiction. OSRs therefore are distinct from income from any other source in form of transfer or donation. Total Income to local governments- Grants and Transfers from government at the centre, [ 12.5% of national budget goes to Hergeisa] Local revenues Direct grants from development partners and NGOs donations from private citizens 8 Sources and structure of OSRs Activity: 1) Legal framework- R&D Law- Revenues are approved by the law. What improvements are required to support enhanced revenue mobilization? 2) Tariff structure examine the schedule and discuss why some revenues are not being collected. Review and propose new initiatives; (a) from the already existing schedule (b) sources outside the schedule (3) estimate yield from the proposals made. 9 3

4 Activity: Brainstorming and group work Justification for payment of taxes 1) What is the impact of low revenues on service delivery and the policy of decentralization? 2) How would you justify payment of revenues by residents during a revenue mobilization sensitization meeting? 10 Rationale for revenue mobilization A civic and constitutional duty- all eligible persons MUST pay taxes Increasing quality and quantity of public service delivery Growing urban populations are increasing demand for specified services such as garbage collection and disposal Survival as government units- LGs must evolve mechanisms to increase revenues so as to respond to new service demands 11 Rationale for revenue mobilization Achieving objectives of decentralization- Inadequate local revenue in real terms undermines the desire for good governance and social wellbeing Increase local government autonomy and independence to provide for local priorities and reduce too much control by the centre 12 4

5 Rationale for revenue mobilization Tax payment by residents encourages demand for downward accountability for political leaders LGs can provide better remuneration for staff and councillors Limited external funds- The central Government and Development partners may have financial constraints already 13 OSR legal and policy framework Discussion on Revenue Policy considerations for a tax revenue instrument Adequacy and productivity Simplicity Elasticity and flexibility Social Equity Administrative Capacity and costs Taxpayer Convenience Certainty, predictability Political Acceptability Economic Impact and ability to pay Reference to Table 2 in Participants manual 14 OSR legal and policy framework Activity 1) Evaluate the suggestion for introduction of street parking and a new tax on every able bodied resident of shs 15,000 per year. 2) Evaluate using the criteria and policy considerations discussed earlier. 15 5

6 OSR performance Activity: 1) Post amounts on excel spread sheets for the recent three years.[ 2012,2013,2014] 2) Compare Budgeted and actual collections and comment on variances. What was the cause? 3) Develop growth trends in excel sheets 4) Discussion to explain the reasons for the trend 5) Discuss actions to change the situation 16 Sample format-performance monitoring reports Revenue type budget 2014 actual Var. Growth % Remarks Livestock Property Business Charges Participants use own data to complete table and analyze the trends and explain why this is so. What is the action plan? 17 OSRs performance and Monitoring Revenue type No. Payers No. Paid Var. Why? Budget Actual Perf. % Var. Why? Live stock % -400 Property Business Charges Explain that this is necessary for ensuring quick corrective action even when the LRMP is in place The auditor MUST investigate all variances 18 6

7 Role of stakeholders Revenue mobilization is a joint effort of various stakeholders both within the LGs and externally. In order to have a structured implementation of the LRMP, roles of each stakeholder should be understood and respected Key stakeholders The Ministry of Interior The ministry of finance The decentralization Champion Office The LGAs The Mayors Chief executive Secretary Director of revenues All heads of LG departments The council and Councilors LG Chiefs, Traditional and Community leaders Taxpayers of all categories 19 Stakeholders role Activity: Form groups and assign selected stakeholders to each group. Each group identifies the role and how this has an impact on revenue collection How should any challenge be addressed? 20 Downward accountability and transparency The term accountable refers to the requirement to give a report or explanation of one s actions and performance. Accountability refers to explanations given by staff and political leaders to the taxpayer and other stakeholders about their performance and how funds have been utilized Accountability by providing documentary and other evidence in support of actions taken in line with expectations of taxpayers and other stakeholders such as donors Show and explain the outcomes and outputs and not merely paper evidence in order for such action to be evaluated with respect to generally pre- agreed outcomes. 21 7

8 Downward accountability and transparency Brainstorming activity: 1) Should financial and budget information be publicized? 2) Which information should be published? 3) What are the benefits derived from publication of operating and financial information? 4) How should we publish the information? 22 The end SESSION ONE: LOCAL REVENUES CONCEPT AND LEGAL FRAMEWORK 23 Local Revenue Mobilization Initiative Revenue Administration process Session Two 24 8

9 Session objectives Harmonize understanding of revenue administration activities and process Evaluate challenges and opportunities Discuss guide for best practices in revenue mobilization Find solutions to revenue administration bottlenecks and challenges Initial steps for development of a framework matrix for LRMP and R-MAP 25 Discussion issues and scope Revenue administration processes Stakeholder roles and responsibilities Revenue administration best practices New revenue sources Evaluation of a new revenue sources Policy framework for new revenue sources 26 Revenue administration process Accountability and oversight Legal and policy framework Publicity and sensitization Revenue Mobilization Recording and a monitoring Billing and collection Registration and assessment 27 9

10 Best practices Best practice means what activities should be undertaken so as to make the LRMI more effective and efficient. Brainstorm: suggestions of best practices for: 1. Registration and assessment 2. Billing and collection 3. Recording and monitoring 4. Accountability. 28 Revenue administration challenges Group Activity: 1) Develop a matrix table for Processchallenge-solution- when-by whom 2) Complete the matrix using Ms-Excel spread sheets or Ms-word. 3) [keep record for use in R-MAP later] 29 Sample matrix for Activity- Revenue Administration Processes Action Plan Process challenge Activity Time Cost Resp. PX Policy and legal Framework Enumeration and registration Sensitization and publicity Assessment and billing Collection and monitoring Recording and Accountability and oversight Outdated tariffs No incentives Review tariffs and Incentive schemes 1. Appoint teams 2. Training 3. Logistics 30 10

11 LRM Best Practices Activity: 1. Form at least five groups to discuss suggested best practice for each item in the revenue administration process. 2. Tabulate the best practices and discuss applicability- what works, what is a quick win, what does not work. Selected persons may present in a plenary, at most five minutes per presentation 31 Oversight and accountability Regular reporting to Council and analysis Regular internal and external audit Publicity of reports Publicity of where the money came from including display of which villages contributed what Publish list of defaulters and those prosecuted 32 The end SESSION TWO: REVENUE ADMINISTRATION PROCESS LRMI TRAINING 33 11

12 Local Revenue Mobilization Initiative OSR Performance analysis Session Three 34 Session objectives Be able to perform revenue analysis with excel spread sheets Be able to compare performance between districts and municipalities Being able to generate analytical periodic reports Identification of challenges and solutions Develop matrix of actions for the R-MAP 35 Performance analysis Activity: 1. Using excel in put revenue date for the last two years 2. Using formula determine the growth for each revenue 3. Percentage contribution to total OSR 4. Percentage contribution to total budget 36 12

13 GARDO Total revenues Analysis Share Share in in OSRs Budget Growth Livestock taxes 171, ,326 22% 10% 13% Land based taxes 198, ,213 25% 11% 11% User Fees and Charges 218, ,487 30% 13% 19% Business Licenses 141, ,947 23% 10% 41% Total OSRs 729, , % 44% 20% 37 GALKACYO Total revenues Analysis Share in OSRs Share in Budget Growth Total Livestock taxes 8,090,607 9,775,169 32% 32% 21% Total Land based taxes 2,136,263 4,746,433 16% 15% 122% Total User Fees and Charges 2,703,962 3,326,662 11% 11% 23% Total Business Licenses 10,492,077 12,530,210 41% 41% 19% Total OSRs 23,422,909 30,378, % 99% 30% WHAT IS THE CAUSE OF TREND IN LAND BASED REVENUES? 38 GAROWE Total revenues Analysis Share in OSRs Share in Budget Growth Livestock taxes 715,182,000, ,562,000,000 10% 9% -8% Land based taxes 2,061,411,000,000 3,555,863,000,000 52% 51% 72% User Fees and Charges 17,026,000,000 1,539,218,000,000 23% 22% 8940% Business Licenses 747,410,000,000 1,079,861,000,000 16% 15% 44% Total OSRs 3,541,029,000,000 6,835,504,000, % 97% 93% 39 13

14 % OSRs Growth 23-Jun-15 OSRs Growth Rates Puntland 140% 120% 100% 80% 60% 40% 20% 0% -20% Garowe Gardo Galkacyo average Livestock taxes -8% 13% 21% 9% Land based taxes 72% 11% 122% 69% User Fees and Charges 107% 19% 23% 50% Business Licenses 93% 41% 19% 51% 40 Performance analysis Activity: 1. Participants review the revenue growth trends summaries developed and document possible reasons for these trends What caused the wins, better performance What caused poor performance? 41 Brain storming Activity: Where is the problem Low tax base Low collection efficiency and effectiveness- less than billed is collected Low tax coverage- not all business and residents are in the tax registers High default rates and poor enforcement Low capacity of staff and logistics Political interference? Corruption and dishonesty by staff and collectors Delays in collection Insecurity Pay stations too far? Staff walk long distances Lack of enough personnel Distrust of taxpayers Lack of data and records Poverty Low incentives, low pay Poor enforcement systems Weak laws to enforce? Poor sensitization and community engagement Low accountability- where is the money? Inadequate staff 42 14

15 Key Challenges and Bottlenecks 1. Policy and Legal framework lack of clarity, Tariff structure and rates absence of specific enabling laws Weak prosecution law and high evasion 43 Key Challenges and Bottlenecks 1. Low Revenue base Poverty and unemployment, high levels of poverty, deprivation and unemployment Undocumented commercial activity 2. Assessment and sensitization Low or weak sensitization systems Minimal political involvement Inadequate data capture and follow up Low and uneconomic tariff s GIS needs physical validation 44 Key Challenges and Bottlenecks 3. Revenue Collection and monitoring systems Low collection efficiency and effectiveness Low staff capacity in terms of skills and tools Low logistics in terms of transport and data management. Computers are in short supply Low staff capacity Low remuneration and incentives Weak oversight and monitoring structure. low enforcement and compliance systems Low perceived accountability and service visibility 45 15

16 Conclusions and Possible corrective action 1. Better revenue data capture and reporting 2. Address the criteria for adjustments in tariff rates as an initial step 3. Staff remuneration and skills- collectors 4. LRMP and communication strategy 5. Focus on collection of arrears and stop build up 6. Strengthen/establish Internal audit and oversight function 7. Focus on specific legal framework 8. Local economic development 46 The end Session Three REVENUE PERFORMANCE ANALYSIS 47 LOCAL REVENUE MOBILIZATION INITIATIVE LRMP SESSION FOUR 48 16

17 Session Objectives Discuss meaning and concept of LRMP Identify performance challenges Develop solutions Hands-on development of a draft framework matrix for LRMP 49 LRMP What is a revenue mobilization plan? What is the purpose served by a LRMPs? The LRMP has a significant impact in revenue mobilization because it tells us what should be done, when, defines the expected output in terms of revenues, defines expected outcome in terms of impact on economic activity and social wellbeing and finally indicates who will do the activity and when. 50 LRMP The LRMI has expectation that LG administration is committed to optimizing the revenue sources Focus on exploiting opportunities to identify new revenue sources where the existing revenues are inadequate to meet the demands of residents

18 LRMP LRMP is a strategic tool to ensure that consequent actions are coordinated and structured The LRMP is an expression of commitment and putting in place a wide-ranging series of improvements to its administration policies, legal framework and operational structures 52 Performance analysis Activity: what next solutions 1. Basing on analysis in previous sessions, Groups make suggestions of what works and what does not in terms of corrective action 2. Format challenges and correction action in table form for each key revenue category 53 Group work: LRMP and R-MAP Revenue Category: Tax on Land Process Challenges Action Outcome/ Output Legal and administrative framework Time By Whom 1. Participants document the discussion for selected revenues and attempt to complete the table using Ms excel or Ms word 2. Format and sample of LRMP and LR-MAP are introduced for comparative purposes 3. Comments are made of the samples provided 4. Project revenues for next 5years 54 18

19 Revenue performance Identify possible corrective actions Tabulate discussion Revenue Action Planning Administration process Assessment and billing challenge Late due to lack of stationary No assessment teams Planned Solution Early procurement Collection Law on enforcement Increase sensitization cost dates 3m Oct m Sept LRMP for specific revenues Activity: arrange participants in groups and each assigned a revenue category 1) Livestock revenues 2) Property revenues 3) Business revenues 4) User fees and charges 56 LRMP for specific revenues Identify challenges for the specific revenue class 1) Indicate solutions 2) Time line 3) Cost 4) Responsible person Complete LRMP matrix for property tax 57 19

20 Example format of LRMP Property tax Challenge Activity Task Time Resp. Px Low Tax base Enumeration Census of economic Sept 2015 Kalifan activity Economic empowerment through LED Tax coverage Registration Door to door assessment Abdikarim and assessment Billing early Setting specific pay days Collection Omar efficiency and Hassan effectiveness 58 The end Session Four LRMP 59 LOCAL REVENUE MOBILIZATION INITIATIVE R-MAP SESSION FIVE 60 20

21 OBJECTIVES Prioritizing revenue mobilization corrective actions in the LRMP Hands-on development of R-MAP Analysis of revenue monitoring best practices 61 R-MAP and Monitoring The R-MAP details the activity to be done, why it is to be done, what the expected results are, the time for performance and the responsible person. 62 R-MAP Activity: Review the developed LRMP and identify activities in three time zones 1) Short term 2) Medium term 3) long term 63 21

22 What the LRMP may look like Challenge Activity Task Time Resp. Px Low Tax base Enumeration Census of economic Tax coverage Collection efficiency effectiveness and Registration and assessment activity Economic empowerment through LED Door to door assessment Billing early Setting specific pay days Kalifan Group each task in three time zonesshort, long, long 64 Illustration R-MAP Strategy and actions during planning periods Identified Challenge Short term [ 0-6 months] Medium [6-12 months term] Long term [12-24 months] No enabling Legal and Appoint revenue planning Presentation of resource Enactment of laws administrative policy task forces and teams specific bills to parliament Create an independent framework Identify disabling clauses Approval of Remuneration internal audit department in law structure Proposals for new revenue sources Narrow Revenue Base Resource mapping and Investment promotion Develop loan and savings inventory LED initiatives schemes Economic empowerment- Promotion of peace and security LED Participants use the example to develop a R-MAP for own Lg by following the generic challenges and solutions based on revenue administration processes. 65 Revenue Mobilization Monitoring The monitoring concept is to put in place procedures and to perform activities on a continuous basis that will ensure that maximum effort is being put into the collection of revenue in order to maximise yields or total collections at the lowest collection cost possible. Of special importance in revenue collection monitoring is the prevention of irregularities of any form and especially fraud 66 22

23 R-MAP and Monitoring To ensure that the LRMP and R-MAP remain on course, the revenue mobilization activity referred to as monitoring must be undertaken The monitoring concept includes ensuring that the Plan is actually followed and continuous corrective action done. 67 Monitoring discussion issues Revenue collection targets Continuous evaluation of control systems by internal audit Controls over cash collections Controls over spending Controls over access to records Compliance procedures Regular performance analysis Feed back and corrective action Regular reporting 68 Monitoring success of R-MAP The monitoring of revenue collection therefore encompasses those procedures and processes performed by Political and Administrative officials within a LG to check; 1) Whether the planned activities are being complied with 2) What the implementation challenges are 3) Whether revenue is being collected economically 4) Whether revenue is being collected efficiently 5) Whether the safety and financial controls are complied with 6) Whether the risk for defaults and undermining of service delivery is well managed 7) Revenue is being mobilized and collected in accordance with set rules and expectations of the LRMP and the legal framework 69 23

24 Session Five The end R-MAP 70 Local Revenue Mobilization Initiative Session Six Revenue and expenditure projections 71 Objectives Demonstration of a linkage between revenue mobilization and service delivery Linking LRMP to service delivery work plan Demonstration of service sustainability with better revenue mobilization Developing consensus on what strategy works 72 24

25 Revenue and Expenditure projection Projections become targets against which future performance will be measured Revenues are raised so that there is improvement in service delivery, hence expenditure prioritization 73 Revenue and Expenditure projection Increased revenues due to strategy change should be should be reflected in increased allocations to priority services Better expenditure estimation and prioritization will increase willingness to pay and reduce costs of enforcement 74 Revenue projection Activity Based on growth figures determined earlier develop a revenue projection for each revenue category for

26 Galkacyo trend at 20% growth rate p.a. 100,000,000 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 Gardo Galkacyo 10,000,000-2,013 2,014 2,015 2,016 2,017 2, Gardo at 22% growth rate 3,000,000 Gardo 2,500,000 2,000,000 1,500,000 1,000,000 Gardo Linear (Gardo) 500,000-2,013 2,014 2,015 2,016 2,017 2, Revenue Projection Revenue type Livestock taxes Property taxes Business licenses User fees and charges Total OSRs Total CG Transfers Total private Donations Total Donor funding Total external funds Grand Total Budget

27 Summary of necessary conditions for the projection Setting realistic tariff rates and review of structure Equitable tax instruments Ensuring accountability and transparency Identification of new revenue sources Better collection effectiveness and efficiency and expanding the tax net Increasing revenues may require setting monthly targets Setting collection targets Effective control systems 79 Expenditure prioritization Activity 1) Brainstorm on what services and activities are priority 2) What is the current level of service budgets 3) What levels of growth will be planned 80 Expenditure prioritization Activity Based on present needs, participants develop an estimation of what is likely and desirable expenditure projection matrix. Key services Health and hygiene Water and sanitation Education and vocational training Roads and transport Social services Administration and governance 81 27

28 Group activity: Priority Expenditure projection Priority spending Education Health Works and infrastructure Water, sanitation and Hygiene Note: mandatory spending on investments Wage increases, counter part funding for development fund National development plan goals Approved Lg development plan Develop an expenditure projection for PRIORITY EXPENDITURE Service sector Natural Resources Water, Sanitation and Hygieneand solid waste Primary Health Care Education Transportation and Roads TotalNew expenditure Total present needs Surplus deficit 83 Immediate Next steps Sn Action required 1 Setting up LRMP steering committee 2 Review legal framework and revenue policy 3 Development and monitor of LRMP and R-MAP 4 Skilling and Training of Trainers in LRMI 5 Approval process for new Tariffs 6 Assessment and appeals committee/teams 7 Complete labeling of property 8 Establish a Revenue Monitoring and Audit Unit 84 28

29 Conclusion Making it possible to increase revenues for municipalities will result into better service delivery. HOW? (1) New revenue sources will identified (2) User fees and charges will be adjusted towards fair market rates (3) Improved data management and computerization will result into more revenue capture (4) Training will enhance staff and management skills (5) Enactment of relevant legal framework will ensure appropriate enforcement 85 SESSION SIX: REVENUE AND EXPENDITURE PROJECTION THE END LRMI 86 29