ABSTRACT
This study that was conducted at the Bekwai Municipal
Assembly was meant to explore the Contribution of Internally Generated Fund
(IGF) to the MMDAs Development Framework, the case of the Bekwai Municipal
Assembly. The study relied mainly on secondary sources of data collated from
annual accounts for the period, 2010-2014. Interview was also conducted with
the Municipal Finance Officer to ascertain relevant information that would
otherwise not be available from the secondary data. The study revealed that the
revenue generated internally is lower in proportion to the Central Government
Transfers (DACF, DDF and Donor Funds) and targets are mostly not met. The study
further showed that the trend of revenue mobilization has witnessed a slow but
steady growth throughout the period under consideration and opportunities exist
for improvement. Aside the uncooperative attitude of tax payers‘, and
difficulty in locating taxable assets and activities, some major challenges
included the absence of logistics including a vehicle and the apparent
disconnect between the Assembly and the citizenry in respect of tax education.
It has therefore being recommended that a common platform beyond fee fixing
resolution meetings be created for relevant stakeholders in the revenue mobilization
effort. Also the assembly should explore the use of private tax collectors as
well as the use of automated tax collection system.
CHAPTER ONE
GENERAL INTRODUCTION
1.1 BACKGROUND
Local Governments (LGs) as an arm of the Central Government
was enacted through an act of Parliament Act 462 (1993) to oversee the
activities of Metropolitan/ Municipal/District Assemblies (MMDAs) and to
provide socio-economic infrastructure to support economic activities within
these MMDAs. The goal of Ghana‘s decentralization programme is to bring
governance closer to the citizenry. Implementation started in the 1990s where
power, authority and resources have been slowly transferred to the
Metropolitan/Municipal/District Assemblies. Over the period, the programme has
since chalked some successes particularly, citizenry participation in political
governance and local level decision making. In spite of this, a major challenge
threatening the Metropolitan/Municipal/District Assemblies is the mobilization
of revenue and the efficient and effective use of such revenue for development
(Macrothink institute, 2013)
There are several constraints on the delivery of these
services; amongst others is finance; the generation of revenue and its
effective and efficient management. In this regard, the 1992 constitution of
the republic of Ghana, and Act 462 (1993) handed Metropolitan/Municipal/District
Assemblies (MMDAs) significant financial power to Impose Taxes, Rates, Fees,
and Surcharges on the citizenry and businesses within their territorial
boundaries to generate revenue to undertake the activities and development of the
Assembly.
Revenues can be seen as the life-line of Metropolitan,
Municipal and District Assemblies and its effective mobilization will
facilitate the meeting of set objectives and goals. On this score internal revenue generation becomes
important in the delivery of development projects. Though the revenue
(Internally Generated Fund) potential of Assemblies is not tapped to its
fullest, it is estimated to contribute substantially to the provisions of basic
services and amenities such as health, water and sanitation facilities and
educational infrastructure in the local authorities.
This study therefore seeks to assess the contribution of
internally generated revenue otherwise called Internally Generated Fund (IGF)
to the Metropolitan/Municipal/ District Assemblies Development Framework: focus
on the Bekwai Municipal Assembly. The research looks at the tax chain as the
basis of comparison of five local taxes. These Taxes are Rates, Lands, Fees and
Fines, Licences and Rent. Bird, (2010) has indicated how Local Governments
(LGs) financing may appear to be a less significant issue within the National
and Local levels. However most of the decisions in the national public sector
have little direct effect on the daily life of the citizens. Fiscal
Decentralisation is an aspect of decentralisation policy that supports and
further streamlines the financial capacity of LGs in the country. It involves
four policy issues and these include fiscal regulation, inter-governmental
transfers (IGT), revenue, and expenditure (Appiah et al, 2000).
Helmsing (2005) underscores the inability of LGs in sub
Saharan Africa ―to define tax rates and service charges and to develop their
own tax bases in accordance with their expenditure responsibilities‖. As opined
by Smoke (1993) LGs determines the local revenue base. However, Urban LGs have
reliable revenue bases than rural LGs. This is further explained by the less
developed nature of local economies and their obvious implication for the size
and composition of existing revenue base. The industrial activities and private
property in developed economies constitute the local revenue base; in contrast
Local revenue bases in many developing countries are largely unstable and often depend on agricultural income since
collection of property rates, fees and licenses in particular is problematic.
This observation was corroborated by Boko, (2005) in a recent study that market
taxes constitute an important source of local revenues in many LGs in
developing countries. In a related study, Bahl et al, (1984) also indicated
that one critical prerequisite for local governments in delivering their
mandate to its citizenry is the availability of adequate financial resources.
Local governments are tasked with various functions, amongst which is the
provision of services to its citizenry.
1.2 PROBLEM STATEMENT
Bekwai Municipal Assembly is one of the orders Assemblies‘ in
the Ashanti Region and recently being upgraded to Municipal status. As the case
with MMDAs in the country, there exist insufficient capacity, weak monitoring
and supervision of revenue mobilization efforts at Bekwai Municipal Assembly.
This reduces the Assembly‘s ability over the years to generate revenue
internally to complement Central Government Transfers to meet the numerous
social and infrastructural demand of its growing population. Although this
issue has gained currency as a topical issue, ignited and stimulated discussion
on several platforms in recent times, and its potential researched, gaps still
exist; hence a study in the trend of internal revenue mobilization in Bekwai
Municipal Assembly is imperative.
1.3 AIM AND OBJECTIVES
1.3.1 Aim of the Research
The aim of this study is to explore the Contribution of
Internally Generated Fund (IGF) on the MMDAs Development Framework, the case of
the Bekwai Municipal Assembly.
The objectives of the study are classified into general and
specific. The general objective is to assess the trend of revenue mobilization
and the effectiveness of existing revenue mobilization strategies of the Bekwai
Municipal Assembly.
The specific objectives of the study are:
To identify the sources of Internally Generated Funds (IGF)
by the Assembly.
To determine the trend of IGF collected by the Assembly in
the last five (5) years.
To assess the strategies of mobilizing revenue for the
Assembly.
To examine the challenges that impede revenue mobilization in
the Municipality
1.4 RESEARCH QUESTIONS
The key research questions that will be expressed for the
purpose of the enquiry are:
i. What are the
sources of local revenue generation in Bekwai Municipal Assembly?
ii. What is the trend of local revenue mobilization in the last
five years?
iii. What strategies can the Assembly adopt to improve revenue
mobilization for development?
iv. What are the challenges confronting revenue mobilization in
the Assembly?
Sound revenue mobilization by a local authority is a pre –
requisite for investment, capital formation and development. Aside generating
and increasing revenues, the act of mobilizing internal revenue could as well
foster local political and administrative empowerment. Increasing, revenue
mobilization remains an important issue for consideration by MMDA‘s in Ghana.
The study underscores the trend of revenue mobilization and existing strategies
for revenue mobilization and their effectiveness and efficiency.
A critical assessment and understanding of strategies that
underpins revenue mobilization in the Bekwai Municipal Assembly will lead to
the overall evaluation and assessment of effectiveness of the assemblies‘
strategies for revenue mobilization. Besides, the study would broaden the
literature landscape for further studies in revenue mobilization practices in
Metropolitan/Municipal/District Assemblies.
1.6 SCOPE OF THE STUDY
This research focuses on Bekwai Municipal Assembly in the
Ashanti Region. The Municipal Assembly is chosen because of the evidence of the
phenomenon under investigation and the challenges the Assembly is facing in
revenue mobilization. The strategic location of the Assembly close to Kumasi
coupled with rapid growth in population and economic activities makes the
Municipality a better place to study. The study would explore the trend of
revenues mobilised, existing strategies, opportunities available for increasing
revenue mobilization and challenges.
The research focuses on revenue mobilization enhancement of
Bekwai Municipal Assembly in the Ashanti Region. Both primary and secondary
data sources will be employed. Secondary data would largely come from existing
revenue data from Bekwai Municipal Assembly. The primary data will be gathered
through the administration of structured questionnaires. The rationale behind
the use of both data sources is to enable the researcher gain better
appreciation of the research findings. The sampling technique to be adopted is
the Purposive Sampling Technique. Owing to the specific needs of the study this
targeting technique is most appropriate.
1.8 LIMITATIONS
The study is focused on the bekwai municipal assembly.
Meanwhile the findings are related to the district assembly frame work hence
the findings cannot depict a true picture of internal revenue of all districts.
The use of secondary data and interview of the finance office
only makes generalization of the findings problematic, however the nature of
the research objectives made it possible for the successful use of secondary
data and interviews.
The limited period of the study and resources were also
constraining variables. Inspite of these challenges the findings of the
research made available some relevant information for further research.
This study is arranged into five chapters. Chapter one is the
introductory part of this research. The rest of the study is organised as
follows: Chapter two presents review of relevant literature. Chapter three
presents the methodology and procedures used to conduct the research. The fourth
Chapter analyses and discusses key finding with reference to relevant
literature. The fifth chapter contains the summary of the findings, conclusion,
and recommendations of the study.
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