The fundamental responsibility of sub-national governments across the globe is to provide services for the basic needs of the people and communities within their jurisdiction. To carry out such a mandatory function effectively requires local government authorities to devise concrete means and tools by which they can pool and mobilize needed resources not just within their jurisdictions but also from outside their responsibility areas. Thus, revenue mobilization is a basic task of every local government authority globally. However, sub-national governments across Africa South of Sahel tend to concentrate their revenue generation on the intergovernmental transfers from national states and therefore overlook the amount of revenue that could be mobilized using their statutory powers assigned to them. In this instance, revenue mismanagement and diversion of public funds and the inability of local government authorities to generate revenue for capital-intensive projects are widely reported in the region. Local government authorities in Africa South of the Sahel often overlook not just the amount of revenue ‘cash cow’ located close to their jurisdiction, but compound this problem with avoidable revenue governance crises that increasingly affect the implementation of local government budgets.
This problem persists because many subnational governments lack sufficient capacity to mobilize internal revenue. Thus, instead of complementing the allocative efforts of central governments to meet the basic needs of people and communities, local government authorities in SSA rather become heavily dependent on central government revenues. This challenge pushes local government authorities to become pliant agents of central government authorities, such that they rather satisfy central governments at the expense of addressing local needs that they have been constitutionally mandated to deliver. This often leads to a meager tax-to-GDP ratio in many low- and middle-income countries.
Thus, in this write-up, I argue that for improved governance delivery at the local level in Africa South of Sahel to be achieved, there is a need for an efficient and effective system to mobilize internal revenue. One such efficient system is the digitalization of revenue mobilization. I make this suggestion for several reasons.
By law, sub-national governments are mandated to generate local revenue to develop their administrative areas through fee-fixing regulations and by-laws. These fees include the property rate, business-operating rate, and lorry tolls, among others. However, there is a high level of unwillingness on the part of the residents in most low-middle-income countries to honor their tax obligations and these attitudes make it difficult for local authorities to be able to provide the needed development required in their administrative areas. This broad challenge of local governance in Africa South of Sahel is particularly observable in Ghana where most District Assemblies are financially deficit and hence largely dependent on the central government's statutory payments to be able to meet some of their basic responsibilities. This deficiency is however critically reflected in a broader governance culture whereby there is a significant preference for reliance on paper documentation coupled with revenue mobilization laws that have outlived their time. For example, there has been an apparent neglect of District Assemblies in the National Public Sector Reform that sought to digitalize revenue activities of government agencies. Due to these challenges, district authorities have resorted to various ways of collecting revenue, including own-mobilization outsourcing tax collection and/or semi-private partnerships in revenue generation and/or mobilization. These efforts have yet not yielded any significant improvement over the years, and there is therefore the need to introduce digital systems in generating and mobilizing revenues at the subnational governance level.
Investments in revenue mobilization technologies have grown exponentially among local government authorities worldwide. This trend shows the capacity of technology-driven revenue governance to enhance effective and efficient revenue collection. Such benefits include the ability of digitalized revenue generation platforms to curtail political interference, such as diversion of funds, and misallocation of generated reviews, as well as its especially user-friendly. This could boost and inspire confidence in residents to want to participate in local revenue mobilization governance, including developing a willingness to honor tax obligations. It will also curtail the inefficiencies associated with the manual processes and outmoded tools used by subnational governments in the collection of local revenues.
The call for digitalization of local government revenue generation and mobilization across Africa South of Sahel and more particularly in Ghana moreover aligns with the increasingly popular and expert demands for the reforms of the tax system at the sub-national level. These reforms could take into account the importance of digitalized revenue mobilizations for improved local government service delivery, as the integration of ICT into the tax system has great potential to improve domestic revenue collection across sub-national government levels. ICT is proven to be an effective and efficient tool for revenue collection, and management and has a high probability of reducing financial fraud at subnational governments globally. Therefore, in this modern time, conceiving of a tax administration system that can effectively work without taking an interest in information communication technology is a facade. There is an increasing number of ICT and internet users now across low- and middle-income countries, including Ghana, and the District Assembly systems can take advantage of the number of user-friendly ICT available to enhance the efficiency of local revenue mobilization – the cash cow of improved local government service delivery.
BY Hamdu Abdul Hamid (Ph.D)
Institute of Local Government Studies, Accra, Ghana