Local Government Taxes in Tanzania: Weaknesses of the Current System of Local Government Revenues

Abstract

It is clear that there are problems with the current system of local government revenues in Tanzania. A common critique of local government revenues in Tanzania is that local government revenue sources are low yielding, inequitable, form an obstacle to local economic growth, are inefficiently administered, and impose high compliance costs on taxpayers. Based on such a negative assessment of local revenues, some central government politicians and stakeholders have arrived at the conclusion that own local government revenue sources are not a necessary ingredient for a sound system of local government finance. In fact, a “rationalization” of the local government revenue system announced in June 2003 (which included the elimination of the Development Levy as well as the abolition of a number of other minor local revenues) suggests that it proved politically expedient to accept the argument that it is easier to just eliminate local taxes and introduce compensatory grants to provide resources to the local government level, as opposed to attempting to fix the problems with the current local government revenue system.