Local Government Graduated Tax and Compliance Implications: The Case of Kampala and Mubende Districts

Abstract

Much of the concern with Local Government (LG) reform in Uganda has had to do with its potential to increase the effectiveness of resource allocation, where spending decisions are presumably based on a clearer understanding of local needs with performance ultimately reflected in the local electoral process. The issue examined in this paper is whether following decentralisation there has a been response from LGs in mobilising sufficient revenues in light of expenditure requirements. Also examined are the factors that influence the likelihood of compliance with the Graduated Tax (GT) payments., which constitutes the largest share of the revenue raised by LGs.

Empirical evidence confirms that the perception about local public services has the most important effect in stimulating the likelihood of compliance with GT payment. This would suggest that local citizens are willing to make a nominal contribution towards provision of services but the nature of available public services are a deterrent. In addition, individual's family characteristics reinforced by local commitment as evidenced by longevity in the local jurisdiction induce graduated tax compliance.

Key words: Graduated tax compliance, local government

Eastern African Journal of Rural Development Vol.20(1) 2004: 125-135