Fiscal Decentralisation and Local Revenue Generation in Local Authorities: A Case of Rukungiri District - Uganda

ABSTRACT The study explores the relationship between fiscal decentralization and revenue generation in selected sub-counties and divisions of Rukungiri District~ Local Government. The objectives of the study include: To establish the implication of fiscal decentralization, the effect of assignment of appropriate revenue and functions and to establish the effect of appropriate Intergovernmental transfer systems of local revenue generation in Rukungiri District Local Government were analyzed. The study adopted both qualitative, quantitative approaches and cross sectional design. Data was collected using self-administered questionnaires and face to face interviews. The population was 246 and a sample 106 which was obtained using purposive and stratified sampling methods. 1 06 respondents were given questioners and 81 (74%) were returned fully answered. The results reveal that there exists a relationship between fiscal decentralization and local revenue generation in Rukungiri District Local Government. The study also revealed that, although there exists fiscal decentralization, its role in supporting revenue generation is minimal since the system doesn’t give absolute powers to lower local governments for instance fiscal decentralization allow local authorities to make bye-laws and ordinances to introduce taxes and rates subject to ministerial approval and if he doesn’t approve, such laws and regulations become useless. Lastly, the central government has effectively decentralized the implementation of services delivery but it’s stronghold on priority setting and funding continues. This implies that local governments planning and implementation organs of government have limited discretion over utilization of majority of its funding. Based on the study Ondings, several recommendations were made which include among the following; Rukungiri District should step up revenue generation projects like market, promote tourisn~i by construction of lodes and hotels, and fight corruption among others.

TABLE OF CONTENTS

1~ec1aratioa~

4kp~~rcr~al . ii

Declicatioii • iii

Table ofContents iv

List ofTables viii

I~Ist ofFigures . ix

A~.bstract

List ofAbbreviations .

.xii

1.0 Iiitrocluction • 1

1.1 BackgroundtotheStudy .1

1.1.1 Theoretical background 1

1.1.2 Contextual Background 1

1.2 Statement ofthe Problem 6

1.3 Purposeofthestudy 8

1.4 Objectives ofthe study 10

1.5 ResearchQuestións 10

1.6 Significance ofthe study 10

1.7 Scope ofthe Study 11

1.7.1 Geographical Scope 11

1.72 Contents scope 11

1.7.3 Time Scope 11

CHAPTER TWO: LITERATURE REVIEW 12

2.0 Introduction 12

2.1 Theoretical Review 12

22 Conceptual review 12

2.3 Adequate Enabling Environment to Local Revenue Generation in

Local Government 18

2.4 Assignment ofAppropriate Functions to Sub-National Government.... 19

v

2.5 Intergovernmental Transfer Systems .24

2.6 Summary of the Literature Review 26

CHAPTER THREE: METHODOLOGY 27

3.0 Introduction 27

3.1 Research design 27

3.2 Study Population 27

3.3.1 Sample Size 27

3.3.2 Sampling techniques and procedure 28

3.4 Data Collection Methods 28

3.4.1 Interview Method 28

3.4.2 Questionnaire Method 28

3.4.3 Documentary Review 28

3.5 Data Collection Instruments 34

3.5.1 Interview Guide 34

3.5.2 The Questionnaires 34

3.5.3 Documentary Review 35

3.5.1 Pre-testing (Validity and Reliability) 35

3.6 Procedure of data collection 38

3.7 Data Analysis 38

3.8 Ethical Issues 38

CHAPTER FOUR: DATA PRESENTATION, AND DISCUSSION OF

FINDINGS 39

4.0 Introduction 39

4.1 .1 Position held by the study respondents 39

4. 1 .2 Descriptive statistics for the demographic characteristics 39

4.1 .2.1 Sex of the respondents 40

4.1 .2.2 Age group of the respondents 40

4.1.2.3 Level of education of the respondents 41

4.1.2.4 Duration in service of the positions held by the respondents 41

4.2 The effect of enabling environment on local revenue generation in

Rukungiri District Local Government 42

4.2.1 Descriptive statistics on the enabling environment 42

4.2.2 The effect of enabling environment on local revenue generation in

Rukungiri District Local Government 46

The effect of assignment of appropriate revenue and function to

lower local Government on Local Revenue generation in

Rukungiri District Local Government 47

Descriptive statistics on the assignment of appropriate revenue and

functions 47

The effect of assignment of appropriate revenue and function to

lower local Government on Local Revenue generation in

Rukungiri District Local Government 53

4.4 The effects of appropriate intergovernmental transfer systems on

local revenue generation in Rukungiri District 54

4.4.1 Descriptive statistics on the appropriate intergovernmental transfer

systems 54

4.4.2 The effect of appropriate intergovernmental transfer systems on

Local Revenue generation in Rukungiri District Local

Governrnent5 8

4.5 R-square statistic for the variables 59

CHAPTER FiVE: DISCUSSION, CONCLUSSION AND

RECOMMENDATIONS 61

5.0 Introduction 61

5.1 Discussion of the study findings 61

5.1.1 The effect of enabling environment on local revenue generation in

Rukungiri District Local Government 61

5.1.2 The effect of assignment of appropriate revenue and function to

lower local Government on Local Revenue generation in

Rukungiri District Local Government 63

5.1 .3 The effects of appropriate intergovernmental transfer systems on

local revenue generation in Rukungiri District 66

5.3 Conclusion 69

5.4 Recommendations 70

5.5 Suggestion for Further Study 72

REFERENCES 73