Ghana Needs Local Tax Revenues to Finance Sustainable City Services
Who will you meet?
Cities are innovating, companies are pivoting, and start-ups are growing. Like you, every urban practitioner has a remarkable story of insight and challenge from the past year.
Meet these peers and discuss the future of cities in the new Meeting of the Minds Executive Cohort Program. Replace boring virtual summits with facilitated, online, small-group discussions where you can make real connections with extraordinary, like-minded people.
Urbanisation is an undeniable global trend. By 2030, urban areas are projected to house 60 percent of the world’s population. Of these urban inhabitants, 828 million people will live in slums, and the numbers are projected to keep rising. Cities are facing enormous urban challenges including tackling the impact of climate change, insufficient funds to provide basic services, the provisioning of healthcare and education, and declining Infrastructure – all of which disproportionately affect the urban poor.
Given this context, it’s not difficult to imagine that many people across the globe have no access to clean drinking water, their homes are left dark without electricity, and roads remain unpaved. Everybody knows, whether you like to pay them or not, that (local) tax revenues fund these basic public services. However, in many countries local governments fail to receive a whopping 80 to 90 percent of the revenues that could have been collected.
The result is that these localities fall short of the funds needed to adequately and reliably deliver services to their citizens. As highlighted by Sustainable Development Goals 17 enhancing domestic resource mobilisation, strengthening the ability of cities to collect revenues is an important way to solve this issue. For these reasons, VNG International has developed a methodology to support cities in better mobilising their own resources, to empower them to bridge the tax gap, and to drive their own development.
What is Needed
Bridging the tax gap and increasing efficiency in service delivery is only possible when two preconditions are met:
- First and foremost, a reliable and accountable local government must be in place. To increase revenue collection and improve service delivery, accountable local governments – ones that understand their main task as delivering good services in a customer-oriented manner to their citizenry – need to be in place.
- The second and equally important component is the citizens. It is crucial that they understand the importance of a constructive dialogue with their local government and are stimulated to participate and contribute to their city’s planning and prioritisation processes. According to the World Bank, realising these preconditions will lead to more effective revenue collection that will, in turn, strengthen the social contract between citizens, businesses, and government.
In order to obtain a better understanding of precisely which performance challenges certain cities face, we provide several examples from the Ghanaian context:
- Most cities in Ghana are unable to access information about property valuations due to the high cost of these services.
- There are no reliable databases (e.g., street names or property addresses) to make billing and collection efficient.
- Most cities handwrite bills, which is time consuming and can result in revenue leakages.
- Many tax collectors are nearing the end of their careers as civil servants and are less educated. This renders them less efficient.
- Uneven leadership commitment and political interference hinders revenue mobilisation and collection.
- In most cases, local government employees receive no training programmes pertaining to communications and social skills.
Although these observations come from our research into Ghana, cities the world over a face the same kind of issues.
When we began our work in 2014, we were acutely aware that we should address the two preconditions mentioned above. The change approach should also be relatively easy to implement, scalable, flexible, sustainable, and affordable. In other words, our challenge was to create a methodology that was as simple as possible for addressing complex issues in manner that was easy to implement at a relatively low cost.
The result is a methodology in which we first focus on the local tax administration by improving capacity of staff, procedures and IT support. Experience shows that this is the main constraint on revenue mobilization in local governments of developing countries. Secondly, we pay attention to political awareness, and measures that encourage constructive engagement between local governments and citizens over tax issues and taxpayer education.
Results and Next Steps
Different components of the methodology have been piloted and tested in several projects in Ghana. As a result of these pilots, in Kadjebi, revenues doubled in just one year, and in Elmina, the tax collection base has been increased by a factor of 20 thanks to the implementation of billing and collection software and capacity building. Kumasi has significantly increased market revenues (by 48 percent in one month) by signing a social contract with a group of women locally known as ‘market queens’. In exchange for better sanitation facilities and street lighting, which ensures an overall safer environment in which to conduct their business, these women help with the revenue collection of market fees. The large harbor city of Tema was helped to develop plans for a phased transition from outsourcing their tax collection (at a cost of 30 percent of total tax revenues) to one that is handled internally. In Sekondi Takoradi we assisted in developing a mass communication campaign to make citizens aware of the relation between paying taxes and improved basic services.
Based on the success of our pilot work, the Embassy of the Netherlands in Ghana has agreed to finance a four year follow-up programme across 32 municipalities in Ghana. In these municipalities the full methodology will be implemented in close co-operation with the local and national authorities. The official kick-off of the project will be done by the Ministers of Local Governance and Rural Development and Finance in Cape Coast on March 14th this year.
Leave your comment below, or reply to others.
Please note that this comment section is for thoughtful, on-topic discussions. Admin approval is required for all comments. Your comment may be edited if it contains grammatical errors. Low effort, self-promotional, or impolite comments will be deleted.
Submit a Comment
Read more from MeetingoftheMinds.org
Spotlighting innovations in urban sustainability and connected technology
Middle-Mile Networks: The Middleman of Internet Connectivity
The development of public, open-access middle mile infrastructure can expand internet networks closer to unserved and underserved communities while offering equal opportunity for ISPs to link cost effectively to last mile infrastructure. This strategy would connect more Americans to high-speed internet while also driving down prices by increasing competition among local ISPs.
In addition to potentially helping narrow the digital divide, middle mile infrastructure would also provide backup options for networks if one connection pathway fails, and it would help support regional economic development by connecting businesses.
Wildfire Risk Reduction: Connecting the Dots
One of the most visceral manifestations of the combined problems of urbanization and climate change are the enormous wildfires that engulf areas of the American West. Fire behavior itself is now changing. Over 120 years of well-intentioned fire suppression have created huge reserves of fuel which, when combined with warmer temperatures and drought-dried landscapes, create unstoppable fires that spread with extreme speed, jump fire-breaks, level entire towns, take lives and destroy hundreds of thousands of acres, even in landscapes that are conditioned to employ fire as part of their reproductive cycle.
ARISE-US recently held a very successful symposium, “Wildfire Risk Reduction – Connecting the Dots” for wildfire stakeholders – insurers, US Forest Service, engineers, fire awareness NGOs and others – to discuss the issues and their possible solutions. This article sets out some of the major points to emerge.
Innovating Our Way Out of Crisis
Whether deep freezes in Texas, wildfires in California, hurricanes along the Gulf Coast, or any other calamity, our innovations today will build the reliable, resilient, equitable, and prosperous grid tomorrow. Innovation, in short, combines the dream of what’s possible with the pragmatism of what’s practical. That’s the big-idea, hard-reality approach that helped transform Texas into the world’s energy powerhouse — from oil and gas to zero-emissions wind, sun, and, soon, geothermal.
It’s time to make the production and consumption of energy faster, smarter, cleaner, more resilient, and more efficient. Business leaders, political leaders, the energy sector, and savvy citizens have the power to put investment and practices in place that support a robust energy innovation ecosystem. So, saddle up.
Excellent initiative and well needed across not only the “developing world”, but also to reinforce community spirit and unity in “developed” countries.