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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Improving subnational government development finance in emerging and developing economies: toward a strategic approach

Considerable attention has been given to enhancing subnational development finance in response to the 2008 global financial crisis and recent global development agendas, including the Sustainable Development Goals, Financing for Development, and Habitat III/New Urban Agenda. Much work on this topic is fragmented, focusing on specific elements of development finance: fiscal transfers, capital market access, public-sector lending agencies, or public-private partnerships. Most countries, however, have a range of subnational governments with varying needs and capacities that require different and evolving mixes of development finance mechanisms. Enabling greater subnational borrowing is often desirable but requires adoption of other reform policies to improve the fiscal capacity and creditworthiness of subnational governments over time. This paper reviews the rationale and potential for improving subnational development finance, outlines the overall landscape of institutional arrangements available for this purpose, and considers broad challenges involved. Based on a review of global practice and experience in selected Asian developing countries with a range of special entities and innovations to enhance subnational investment, it proposes a more integrated, strategic approach to building subnational development finance.

Author: Paul Smoke Publisher: Asian Development Bank Publication year: 2019


World Development Report 2019: The Changing Nature of Work

Pages 135-136 are on property tax. 'Another form of recurrent taxation that can be tapped for further resources in most developing countries is immovable property taxes. These taxes do not distort labor markets, human capital accumulation, or innovation decisions. Property taxes also provide a stable source of revenue that is less susceptible to short-term economic fluctuations and is difficult to evade. And although property taxes would likely not flow into federal social protection schemes (they are typically raised by local governments), they could fund regional or municipal social services or reduce the level of federal transfers to local governments. On average, high-income countries raise 1.1 percent of GDP from immovable property taxes. In middle income countries, these taxes yield about 0.4 percent of GDP.19 Yet property taxes represent untapped revenue potential for all countries. This revenue gap is estimated to be 0.9 percent of GDP in middle-income countries and as much as 2.9 percent in high-income countries.20 Governments in Sub-Saharan Africa are estimated to be missing out on revenues of 0.5 to 1 percent of GDP because of no property taxes whatsoever or their limited application.'
 

Author: World Bank Publisher: World Bank Publication year: 2018


Contracting Out Services in the Nigerian Local Government: Implications for Internal Revenue Generation

The primary reasons for creating the Nigerian local government system was grassroots mobilization and development. The Council has however, consistently failed to provide critical services to the rural poor ostensibly because of poor funding. The work examined the structure, functions and accountability mechanisms of the Council vis-à-vis its revenue generation capacity. The problem identified is that the Council contracts out services and its statutory revenue sources at ridiculous prices to patrons even in the face of fiscal cutback and burgeoning demand from the critical populace. Using the Local Government Discretion and Accountability Diagnostic Framework of Analysis and Financial Agency Theory, the paper found that lack of political, administrative and financial accountability mechanisms provides the leeway for unscrupulous Council officials to grossly enrich themselves and their patrons. The paper recommends that the Public Procurement Act which emphasizes Due Process in tendering should be institutionalized by the local government. The anti-graft agencies should be repositioned to deal with treasury looters while the electoral process should be reformed to make it more transparent and inclusive.

Author: Johnson Emeka Nwofia Publisher: International Journal of Social Science Studies Publication year: 2018


The Challenge of Local Government Financing in Developing Countries

Cities are assets, solutions and drivers of economic and social development. Cities possess huge untapped economic potential that can and should be leveraged to create wealth and economic opportunities for all. This requires good urban planning that supports urban compactness, integration, and connectivity. However, even the best urban plans risk ending up unused if they are not accompanied by financial and regulatory strategies for implementation. Strategic public investments must go hand in hand with strategic funding mechanisms and supporting governance systems. The report also identifies successful governance mechanisms for efficient and equitable provision of public services in metropolitan areas of developing countries, and shares experiences and methods to making public service provision more viable in peri-urban areas of large cities and in smaller urban centres of these countries.

Author: UN Habitat Publisher: UN Habitat Publication year: 2017


Approaches to strengthening local government: lessons from Sri Lanka

This article sets out to describe recent approaches to strengthening local government within the framework of the World Bank's Municipal Management Programme (1985–95) in Sri Lanka. The article examines a number of innovations adopted within the programme that are of general relevance to the task of strengthening local government throughout the developing world. The article briefly outlines the background to the present system of local government showing that, whilst existing structures and functions remain relatively weak, a number of important innovations have been introduced to assist with the process of strengthening local resource mobilization and improving performance in service delivery, and enhancing certain aspects of accountability, particularly those areas concerned with the allocation and use of public funds. Since a number of these innovations have wide applicability to the process of local government strengthening and reform it is hoped that this article will demonstrate the practical relevance of certain key innovations for practitioners and policy makers elsewhere.

Author: Richard Slater Publisher: Public Adminstration and Development Publication year: 2007


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