Impacts of States' Revenue Capacity on Self Administration under Ethiopian Decentralized Fiscal System: The Case of Oromia National Regional State
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Date
2014-05
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Addis Ababa University
Abstract
As it has become the Global concern, Ethiopia, since, 1991 has undertaken dramatic change by decentralizing
political, Administrative and Fiscal decentralization from Federal government 10 autonomous State Governments
and to District levels by the respective Regional Constilutions. Fiscal Decentralization, which is the subject mailer
of this paper, is an important dimension of Decentralization which influences both Political and Administrative
aspects of decentralization. This paper utilized both quantilative and qualitative method in describing and analyzing
causes of high degree of vertical Fiscal Imbalance in Ethiopia and its impacts on principle of its Federalism
particularly, on the self Administration of Regional Governments taking ORG as a case study on the base of primary
data obtained through interviews conducted with tax officials and experts in Regional Revenue Authority, officials
and experts in Regional BoFED and through questionnaires provided for selected informants and secondO/y data
obtained in the mentioned regional Bureaus and MoFED. Here, what motivated the researcher to conduct the study
on the topic is that, on the base ofthe1995 FDRE Constilution, Ethiopia adopted dual federal structure composing
nine regional states and two cily administrations (Addis Ababa and Dire Dawa) by giving them the right to self
determination expanding even up to secession (Article 39 of the constitution). Accordingly, regional governments
are responsible for implementing economic and social development policies and for maintaining public order,
including administering a Police force while the federal state is responsible for all powers not delegated to, or
shared, with the regions. It can be observed that, the FDRE Constitution assigns various responsibilities to the
lower units of governments in its expenditure side while on the Revenue side, however, it assigns more buoyant
sources of revenues to the Federal government creating vertical fiscal imbalances which resulted in high
dependence of States on Federal subsidy for the execution of these responsibilities. On one hand, the Constitution
label Ethiopia as fully fiedged federal political system which claims the independence of each level of governments
in relation to Constitutionally Delimited Spheres of its Jurisdictions pam the other. On the other hand, there exists
much Vertical Fiscal Imbalance creating much dependence of States on Federal Government as they do not have
Revenue Capacity even to cover half of their expenditure needs pam their Own Revenue Sources. The finding of
this paper, point out that, the cause of vertical Fiscal imbalance in the study Region, shows the domination of Major
Revenue bases by the Federal government than less commitment of tax collectors, tax evasion, corruption etc.
Further, the paper, viewed that, less revenue capacity of the Region and high dependence on Federal Subsidy affects
its constitutionally guaranteed self Administration (developing socio- economic and political affairs), its autonomy,
quantity and quality of public services, accountability of officials. Finally the paper recommends that, revenue
capacity of Regional Governments should be enhanced to enable them to exercise their constitutionally promised
Self Administration by expanding their Olen Sources of Revenues and conducting effective Transfer System in the
absence of sufficient Revenue Bases in some Regional Governments.
Key words: Self Administration, Fiscal Decentralization, Revenue Capacity assignment, Revenue Capacity
Description
Keywords
Self Administration, Fiscal Decentralization, Revenue andfunclional assignment, Revenue Capacity