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Please use this identifier to cite or link to this item: http://hdl.handle.net/123456789/911

Title: TAX ASSIGNMENT TO SUBNATIONAL GOVERNMENTS IN A DECENTRALIZED FISCAL SYSTEM OF ETHIOPIA
Authors: Mergia, Tesfaye
Advisors: Abebe Yitayew(Assistant Professor)
Keywords: Decentralization
subnational
fiscal
tax and assignment
Copyright: 2005
Date Added: 23-Apr-2008
Publisher: Addis Ababa University
Abstract: Fiscal decentralization is one dimension of decentralization, which refers to the devolution of fiscal resources and fiscal decision-making power by the central government to subnational governments. Ethiopia has developed and defined constitutional and legal provisions to support fiscal decentralization and strengthening of decentralized levels of government. The design of fiscal decentralization is based on four pillars, of which tax assignment is the emphasis of this research paper. The study is based on more of descriptive analysis. In addition to secondary data, primary data produced through interviews and discussions with officials of different levels of government were utilized in the study. The findings indicate that, due to the assignment of very weak tax bases to regional states, their financing capacity is very low. This, in turn, has made regional states highly dependent on the central government for the larger part of their expenditure, which may pose a challenge to the realization of economic efficiency, responsiveness and accountability. Inefficiencies in tax collection and administration have some bearing on the lower financing capacity of the regions. The grant distribution formula also is not encouraging for better revenue effort. Furthermore, though it has been said that the decentralization process is broadened and deepened to woredas, which are considered to be centers of socio-economic development, experiences of SNNP and Oromia regions revealed that currently they control only the expenditure side (through block grants) of their fiscal resources. Still woredas have not been empowered to control their own revenue sources. To enhance economic efficiency, responsiveness and accountability it would be advantageous to take measures in such a way that can raise revenue effort of the regions. The measures should include assigning adequate bases, allowing regional states to have discretion on ‘own source’ taxes, and designing transfer formula in a way that encourages regions to develop their own source revenue. Deepening the decentralization process also requires giving woredas control of appropriate taxes. In relation to this user fees and charges, rural land use fee, agricultural income tax and personal income tax are recommended as appropriate sources of revenues for woredas.
Description: A Thesis Submitted to the School of Graduate Studies of Addis Ababa University In Partial Fulfillment of the Requirements for the Degree of Master of Arts in Regional and Local Development Studies
URI: http://hdl.handle.net/123456789/911
Appears in:Thesis - Regional and Local Development

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