Field and river

20th International Conference of Ethiopian Studies (ICES20)
Mekelle University, Ethiopia

"Regional and Global Ethiopia - Interconnections and Identities"
1-5 October, 2018

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SOLOMON Negussie, Addis Ababa University, Ethiopia

Local governments are increasingly considered as important institutions to play key roles in local development in general and in the delivery of basic public services and in the provision of public infrastructure in particular. Nonetheless, the roles of local governments in Ethiopia are often challenged by the limitations of financial capacity.Theoretically, local governments play significant role when decentralization is put into practice in the form of devolving administrative as well as fiscal powers. In order to fulfil their mandate in a fiscally responsible manner, local governments must have significant sources of own tax and non-tax revenues. Adequacy of own revenues for local governments is the key to both the ability to deliver necessary goods and services, as well as to better accountability of local officials to their constituents. Own local revenues are often complemented by inter-governmental transfers to address differences in expenditure needs and fiscal capacity. In order to effectively address the challenge of mobilizing adequate financial resources, local governments require financing instruments for increasing local revenue capacity. Regional governments of Tigray and SNNPRS claim to have introduced various approaches to address the shortage of adequate revenue capacity at wereda level ranging from improving tax administration to introducing various instruments. The main objective of this paper is therefore to provide a synthetic review of new sources of local government financing in selected weredas of Tigray and SNNPR regions. The focal point of this exploratory study carried out in two weredas from Tigray and two weredas from SNNPRS. The study primarily focuses on descriptive and analytical types of research. It assess the tax and non-tax sources of the weredas, the percentage of local revenue to wereda development projects, the respective roles of local and regional governments in the distribution of grants, and the institutional arrangements for promoting transparency and accountability. It also attempts to analyze the impact of regional and federal grants on local development efforts and identify major challenges in the opportunities. To do so, primary and secondary data is collected for the research from the weredas covered in the research. By addressing the above issues,the rationale and importance of developing own revenue sources is reviewed, as well as investigate different mechanisms and sources of revenues available for weredas to enhance their capacity.