THE EFFICIENCY OF REVENUE COLLECTION IN GHANA’S LOCAL

GOVERNMENT AGENCIES: A CASE STUDY OF THE GA SOUTH MUNICIPAL

ASSEMBLY
 RESEARCH PROPOSAL

Background of the Study

There is a global financial crisis and dwindling levels of aid (Norton, 2003). This underpins the

importance of why the local authorities need to put in place mechanisms to ensure that they are

competitive enough to attract the little donor funds. Holloway (2003) states that local authorities

have limited number range of resources. The greatest dependence is very likely to be on foreign

grants, and it is likely that these funds which make up these grants come from central

government. Finally, building a constituency and creating viable and sustainable organizations is

important for local authorities, since resource mobilization is not simply generating resources for

survival from one year to the next.

Building a constituency of supporters who can be persuaded to give again and more generously

therefore builds a viable, independent and sustainable organization (Norton, 2003). In fact, the

U.S. municipal finance system recognizes this difference with two different types of long term

bonds: General Obligation Bonds that pledge all revenue sources of the local government to

repayment and Revenue Bonds that pledge the revenues derived from a specific source (such as

the water tariff) to repay the bond. In Latin America, there are strong political ties between

central and local governments. Due to such extreme politicization of local authorities, they are

accountable more to the ruling party than to the local masses affecting effective local

government resources mobilization (Horngen, Foster, & Datar, 2007).

Local revenues is a subtotal of all categories collected from a number of sources like market

dues, fines and penalties and parking fees. The devolution of governance functions in Ghana has

created a lot of discussions as such local government’s over-reliance on the national government
funding (Akorsu, 2015). This has also meant inadequate development initiatives and service

delivery to the people. Despite the various avenues for revenue collection such as levies,

property rates, toll fees, fines and penalties, many local governments’ still register low revenues

(Tahiru, Agbesi & Osei-Owusu, 2014).

Studies on local government revenue mobilization in Ghana have demonstrated that authorities

have not been vigorous in generating and collecting their own revenues. Some of the reasons

given for not realizing adequate revenue include lack of adequate human resources, non-

compliance by the residents to pay council dues and lack of goodwill by the government to

support local authorities in realizing the uncollected revenues. Weak by-laws and lack of

appropriate financial strategies have also been cited as contributing to the low revenue

generation and collection (Amoako-Asiedu & Domfeh, 2016).

Strengthening revenue mobilization in developing countries has long been a central concern.

Interest in enhancing revenue mobilization in developing countries is increasing. Most

developing countries are emerging from the crisis with their fiscal prospects broadly intact (IMF,

2010), but with many still facing a fundamental need to raise more revenue from their own tax

bases (Westman, 2004). Achieving the Millennium Development Goals, for instance, has been

suggested to require increasing domestic revenues in low-income countries (LICs) by around 4

percent of GDP (United Nations, 2005). Infrastructure needs are also extensive (IMF, 2010), and

there are climate challenges to address. Advanced economies are increasingly focused on

improving their support of these revenue mobilization efforts. In this context the G-20 leaders

called in November 2010 to report on key issues in strengthening revenue mobilization.

Indeed the effectiveness and efficiency of revenue mobilization goes a long way to improve

service delivery. Service delivery is defined as the process of extending basic services like
education, healthcare, water, transport and communication where the end users are the public or

local people within the country (Ray, 2007). Tax administration refers to the process of

administering taxes like identifying the tax payers, assessing them and levying reasonable taxes

they are capable of paying. Service delivery is tied with performance at the organizational level.

It means fulfilling organizational goals and objectives, especially in satisfying customer needs,

employee needs and the investor needs. This is only possible if there is clear mutual

(management and employee) understanding of the purpose: At the heart of this concern was

whether they are intended primarily to benefit the organization or the individual (Heskett, 2006).

According to SERVQUAL model based on gap theory, there are two alternative ways of

measuring service quality: internal and external measures (Fjeldstad, Katera, Msami, &

Ngalewa, 2010). Internal measures of service quality are designed to provide objective measures

of the firm‘s performance where external is concerned with measuring attitudes and opinions of

customers. Provision of quality should exceed customer‘s expectation. Customers compare

perceived service. If the perceived service is below expectation they lose interest with the

provider while the opposite creates loyalty (Blazek, 2005).

The spirit of decentralization is that local government should generally be in a better position

than the central government to identify local needs, and to deliver public services accordingly

(Brewer, Chandler & Ferrell, 2006). Given this background, the county government is enjoined

to identify and raise revenue from local sources in form of rates, tolls, property tax, fees and

fines among others to boost their financial base for development of the locality. According to

Bhatia (2006) revenue receipts are divided into tax revenue and non-tax revenue which include

among others taxes on properties. Revenue is important part of financial analysis as it contributes

as part of measure to which assets inflow (income) compares with asset outflows. In local
governance, revenue refers to receivables by the government for the purpose of financing its

services, and the implementation of development programmes and they are collectable under the

items of estimates specified by treasury as revenue items including all amount of money received

from sources outside the government entity (Brooksons, 2002).

A strong local revenues base is essential for the sustainability of decentralization programmes.

Local revenue forms a core means of building an independent and accountable local governance

system. Local governments with strong local revenue collection have greater scope for

autonomy, and are more responsive to the needs and priorities of their citizens.

Statement of the Problem

There are several important policy implications for donor and governments. First, the prospects

of taxing the informal sector require a change in approach in how the informal sector and small

firms are viewed (Westein, 2005). Instead of viewing the sector as a social safety net, it is

important to identify how the productive capacity of some sectors can be enhanced. Second, the

prospect of expanding the tax base to the informal sector requires an explicit production strategy

so that firm owners have an incentive to register formally with the tax authorities. Such

incentives might include infrastructure investment, marketing and distribution support and

quality control regulations. Third, micro credit schemes need to be part of a wider sectorial

strategy that involves technological upgrading. Micro credit for its own sake generally creates

low productivity firms (Rick, 2002).

Nowadays, majority of the public sector organizations have been highly involved in the

mobilization of their own revenue. This trend has been largely attributed to the emergence of the

various management reforms introduced into the public sector organizations New Public
Management (NPM) and New Public Financial Management (NPFM) practices (Hood & Lodge,

2004). The reforms, which in most cases advocate the application of the business management

practices into the public sector organizations, have substantially changed the domain of the

public sector entities and put more emphasis on the delivery of public services. As a result, the

delivery of public services has been consistently regarded by the policy makers to be important

function of the public sector entities in the context of the overall economic and social

development (Brooksons, 2002). The public sector entities, including the counties Government

appraise their legal status as the providers of the public services and account for the public funds

entrusted to them, but also to raise sizeable amount from their own sources to support in the

delivery of the public services.

Previous study focused on challenges facing revenue mobilization in the public sector. These

studies have presented varied findings on the state of revenue collection. Akudugu and Oppong-

Peprah (2013) reported the lack of revenue data base and a comprehensive revenue collection,

reporting and monitoring system contributed to high tendencies of cash leakages and under-

collection and reporting of revenues in local government agencies. Adu-Gyamfi (2014) also

found an under-efficient revenue collection system, noting that, there are other revenue sources

that are not being explored by local government agencies. This can be blamed on the absence of

an effective revenue collection channel in local government agencies in Ghana. The existing

studies are prominent on the challenges facing the revenue mobilization system, but fail to

observe the trends in revenue collection as a predictor for effectiveness. There is thus a gap of

how current developments have affected the revenue collection system and how they can be used

to assess its effectiveness. Therefore, there is a need to identify solutions to the lapses in revenue
collection. This study will examine the state of revenue collection in Ghana and establish the

effect on revenue mobilization in order to provide the needed solutions.

Research Objective

The research objective of the study is to determine the relationship between effectiveness of

revenue in Ghana’s local government agencies, specifically within the GA South Municipal

Assembly. Specifically, the objectives are to:

i. Identify the avenues of revenue for the Ga-South Municipal Assembly

ii. Assess the viability of these sources over the long and short term, with focus on the

revenue amounts generated in the last five (5) years.

iii. Examine the challenges confronting the Ga-South Municipal Assembly in their

revenue mobilization process.

Research Questions

Based on the given research objectives, the research questions are:

i. What are the avenues of revenue for the Ga-South Municipal Assembly?

ii. How viable are these sources over the long and short term, with focus on the revenue

amounts generated in the last five (5) years?

iii. What are the challenges confronting the Ga-South Municipal Assembly in their

revenue mobilization process?

Significance of the Study

The study is important to the Ghana government and county governments in formulating sound

financial management strategies in revenue mobilization. It may also be important to the

government in order to adopt policies to enforce financial discipline among county governments.

Therefore, this study is important to the devolved units of governance for the following reasons.

First, the study enlighten local government assemblies to develop techniques to ensure a pool of

resources is available to provide their services more effectively and efficiently. It is also be

significant to researchers and other scholars as a background for reference in future studies and

contribute to the existing knowledge of literature.

Second, the study presents an opportunity to analyse and compare revenue collection with focus

on procedures, systems, employees, measures and solutions used by local government agencies.

The study also aims to develop a new knowledge which that add to the existing literature on

revenue collection in municipalities.

Finally, the recommendations and the research findings will assist the decision makers to

understand the problems which are related to challenges of revenue collection. It is envisaged

that this study will potentially open up new directions that will assist in future research.

Literature Review

The review will be arranged under themes that explain revenue mobilization from the point of

view of collection and administration. These themes include:

The Concept of Fiscal Decentralization

The concept of fiscal decentralization explains how duties like resource allocation and revenue

mobilization is transferred from the central government authority to the lower levels of

government, agencies and other central government field offices. The concept is used to

breakdown the devolution of revenue mobilization from central to local government agencies

(Prud'homme, 2003). The justification for this theory is that, if local governments are to carry out

decentralised functions effectively, they must have an adequate level of revenues either raised

locally or transferred from the national government– as well as the authority to make decisions

about expenditure.

The Concept of Revenue Administrability

The concept of revenue administrability explains the ease with which a revenue can be

administered and collected in a manner which will make mobilization less challenging (Batt,

2012). If it becomes a burden it result in complexities that may result in increase in aggressive

tax avoidance and evasion. This will then allow for system failures in tax mobilization. The

concept makes an argument to how local government agencies function in terms of revenue

mobilization and if the tenets of the concept of admistrability are held. In this study, it is

discussed that the success of revenue collection is dependent on the easiness of its administration

to both the taxpayers and revenue collectors. The study discusses how revenue collection is

administered in local governments in Ghana.

Research Methodology

The study will adopt a mixed method approach. This approach advances the systematic

integration of quantitative and qualitative data within a process of inquiry. Thus integrating

quantitative and qualitative data during data collection, analysis, or discussion. The specific

method will be a survey of the Ga-South District Assembly.

Sampling procedure to be used is a convenience sampling method. Convenience sampling is a

type of non-probability sampling method where the sample is taken from a group of people easy

to contact or to reach. Convenience sampling eases the strain on researcher to reach out to

inaccessible study units and is responsive of the period within which the study is undertaken.

Currently, the continuous spread of the COVID-19 pandemic in Ghana requires that research

uses a cautious approach in reaching respondents.

Data will be obtained from a survey, observation and semi structured interviews of 25

participants from the assembly.

i. 20 assembly employees

ii. 5 assembly authorities

These people will be reached out to by means of a formal permission to contact and consequent

mailing of semi-structured interview questions. Additional secondary data will be collected from

financial reports of the sampled local government agencies with focus on revenue figures

generated.

Interviews will be transcribed and recorded into themes for discussions. This will be done using

a method of thematic analysis to highlight, trends in revenue collection, processes involved and
the efficiency of processes adopted. Quantitative data on financials will be presented using

descriptive statistics with the aid of Microsoft Excel analytical tool.

Organization of the Study

The study will be organized in five chapters which include introduction; the background to the

study, the problem statement, the research questions and objectives, scope and organization of

the study. The second chapter will look at relevant literature for the study. The chapter three will

comprise the methodology; this describes the methods used in selecting the sample for the study,

sample size, sample technique data analysis. Chapter four presents discussion of results. This

chapter five concludes with findings, summary and recommendations based on the key findings

of the study.

References

Adu-Gyamfi, E. (2014). Effective revenue mobilisation by districts assemblies: A case study of

Upper Denkyira East Municipal Assembly of Ghana. Public Policy and Administration
Review, 2(1), 97-122.
Akorsu, P. K. (2015). An Evaluation of The Effectiveness Of Revenue Mobilisation in the
Public Sector Of Ghana. International Journal of Economics, Commerce and
Management, 3(1), 1-16.
Akudugu, J. A., & Oppong-Peprah, E. (2013). Local government revenue mobilisation and
management: the case of Asante Akim South District Assembly, Ghana. Journal of
Public Administration and Governance, 3(2), 98-120.
Amoako-Asiedu, E., & Domfeh, K. A. (2016). The Challenges of Central Government Fiscal and
Financial Policies on Local Government Programmes in Ghana. International Journal of
African and Asian Studies, 26, 32-40.
Batt, H. W. (2012). Tax regimes that don’t invite corruption. International Journal of
Transdisciplinary Research, 6(1), 65-82.
Prud'homme, R. (2003). Fiscal decentralisation in Africa: a framework for considering
reform. Public Administration and Development: The International Journal of
Management Research and Practice, 23(1), 17-27.
Tahiru, F., Agbesi, S., & Osei-Owusu, A. (2014). Investigating the Challenges in Revenue
Collection Process: The case study of Ghana AMA property rate collection. International
Journal of Innovation and Scientific Research, 11(2), 566-576.