Commonwealth Local Government Forum

Local government finance

Resourcing local government remains a central challenge to effective decentralisation. This section has content relating to different models of fiscal decentralisation, options for identifying new sources of local revenue, such as local property tax; and strategies for improving collection and deployment of own-source revenue. It also offers information about improving the borrowing potential of local government, innovative financing models such as municipal bonds, shared services, and public private partnerships.

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Land-based Financing in Metropolitan Cities in India: The Case of Hyderabad and Mumbai

Major cities in developing countries face infrastructure shortage and inadequate financial outlays to overcome it. One way to raise finances is by leveraging the increasing urban land values using different mechanisms. This article studies the experience of land-based financing in the metropolitan cities of Hyderabad and Mumbai in India. It assesses the performance of various mechanisms implemented by the principal urban local bodies and development authorities in these cities by examining their design, collections and utilisation of revenues from land-based financing mechanisms for infrastructure provision. It finds that although land-based financing contributes substantially to revenues of public bodies, there are issues regarding efficacy of design and legal validity that need to be addressed to make it sustainable. Further, the article finds that to a certain extent, some of the public organisations use revenues from land-based financing for capital expenditure.

Author: Sahil Gandhi and Vidyadhar K. Phatak Publisher: Ubansation Publication year: 2016


More Tax Sources for Canada’s Largest Cities: Why, What, and How?

Canadian cities have long called for access to more tax revenues. This paper argues that additional taxes are appropriate for major cities, describes the advantages and disadvantages of potential new taxes, and estimates the revenue from a city income tax, a city sales tax, and a city fuel tax for eight Canadian cities – Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa, Montréal, and Halifax. The authors find that the property tax is a good tax, but cities would benefit from a mix of taxes. In particular, user fees are an important source of revenue and can alter economic behaviour. Taxes on income, sales, vehicle registration, fuel, and hotel stays are also an effective way to diversify local taxes. Of the available options, a personal income tax and a municipal sales tax are likely to generate the largest revenues. Although setting up their own tax systems would grant cities the greatest fiscal autonomy, doing so would be costly. It would be more cost-effective for cities to piggyback new taxes onto provincial taxes, with the province collecting the revenue and remitting it to cities. To promote local accountability, however, it is essential that local governments set their own tax rates. In this way, taxes levied would be linked to services consumed.

Author: Harry Kitchen and Enid Slack Publisher: University of Toronto Publication year: 2016


Intergovernmental Fiscal Transfers in Developing Countries Case Studies from the Commonwealth

Despite growing fiscal devolution, efficient and effective intergovernmental transfers – the transfer of money from central to lower levels of government – remain a vital sub-national government financing in developing countries. This research study examines different approaches to intergovernmental transfers (ICTs) in developing countries in the Commonwealth, and assesses their relative strengths and weaknesses. It includes detailed case studies of India and Kenya, lessons learned from IGT systems in Australia and the United Kingdom.

Author: Munawwar Alam Publisher: Commonwealth Secretariat Publication year: 2014


Local democracy and local governance: benchmarking Rwanda against the Aberdeen principles

The purpose of the study was to carry out an assessment of local democracy and local governance through benchmarking Aberdeen principles on the local government system in Rwanda to appreciate the achievements and establish gaps and suggest appropriate recommendations for future improvement. As laid in the terms of reference, the study was guided by research questions for each of the 12 principles, which include, Constitutional and legal recognition for local democracy, political freedom to elect local representatives, partnership and cooperation between spheres of government, defined legislative framework, citizens participation in local decision making, open local government – accountability, open local government – transparency, scrutiny of the executive, inclusiveness, adequate and equitable resource allocation, equitable services viii and capacity building for effective leadership. The said Aberdeen principles were used to analyse and assess Rwanda’s local government system vis a vis the Aberdeen principles. In terms of methodology, the study employed extensive desk research, analysing local democracy and local governance structures, systems policies and processes in Rwanda. Evidence was collected and collated through wide-ranging literature review with limited field research.

Author: Aimable Kabanda Publisher: CLGF, RALGA Publication year: 2013


Financing Local Government

Decentralisation is now taking place in the public administrations of most countries of the world. A critical determinant of the effective performance of local governments is finance – their ability to both mobilise financial resources and to use those resources effectively and efficiently.

This book explores the variety of methods used to ensure that fiscal decentralisation takes place alongside administrative decentralisation. It considers the range of revenue sources available, the design systems of intergovernmental transfers between central and local government, and the kinds of rules and procedures necessary to ensure that local governments use their financial resources appropriately.

The experiences described in this book will help local government managers, and national policymakers charged with local government finance issues, to ensure that they follow good practice in their own programmes of local government reform.

Author: Nick Devas with Munawwar Alam, Simon Delay, Pritha Venkatachalam and Roger Oppong Koranteng Publisher: Commonwealth Secretariat Publication year: 2008


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