Decentralized Governance from the Perspective of Internally Generated Revenue for Local Development Finance: Analysis and Practice

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Decentralized Governance from the Perspective of Internally Generated Revenue for Local Development Finance: Analysis and Practice

Journal Title: Journal of Empirical Economics - Year 2014, Vol 3, Issue 3

Abstract

The local governance in Ghana has been practised using different models over the years. These models were introduced by the colonial government which was highly centralised. The dynamics of local government in Ghana changed significantly in 1988, when decentralised system of local government was introduced. Several dimensions of Metropolitan governance in Ghana have been considered ineffective and among them is the fiscal administration which attracts several unpleasant comments from the citizenry. Notwithstanding the fact that the Local Government system in Ghana was instituted in 1852 and independent town councils were established in Sekondi- Takoradi and Kumasi in 1894 and 1935 respectively; none of them is free from this allegation. The purpose of the research was to analyse the financial systems of the metropolises. The Metropolises on average generate just about 45 per cent of its total income internally. This is a case of overdependence on transfers from the Central government and other external sponsors. Therefore, it is not strange that the Metropolitan governments are financially controlled by the Central government. The uninformed mind may prescribe more local fiscal empowerment for the Metropolises as the way forward. However, empowerment with poor fiscal administration could hardly turn the tide. As the study revealed, the system of fiscal administration is influenced by political, economic, social, technical administrative and attitudinal factors. The local tax structure has only one main item namely immovable property tax which is poorly administered in terms of tax base determination; low rate impost and poor mobilization. The large immovable property tax is left in arrears and eventually written off. The metropolitan financial performance also needs improvement from within. MMDAs, introduction of new revenue items and increase in rates as basis for increasing internal revenue, hence many of them have expanded revenue structure with several unproductive items. This does not make local revenue mobilisation cost effective. The MMDAs over depend on external funds for their operation, thus compromising the autonomy of local authorities. To overcome this might require a long term fiscal strategic plan which should reconsider the fiscal empowerment relationship between central and local government. The local authorities on their part should shift toward partnership investment as a means of achieving financial breakthrough otherwise the decentralisation system would become a mirage to local residents who initially accepted it as system for accelerated local development.

Authors and Affiliations

Kwaku D. Kessey

Keywords

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