An Assessment of Revenue Generation Capacity in Gambella Region: Achievements and Constraints
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Date
2007-02
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Addis Ababa University
Abstract
Fiscal deficit is a common characteri stic of developing countri es. Particularl y, Sub
Saharan African countries have difficulty in generating revenue to cover their
ex penditures due to weak tax admini stration, tax evasion and corruption problem.
Et hiopia also shares this feature of fisca l deficit, whi ch is always fi nanced through
ex ternal ass istance, and regions lIsually depend on fede ral grants for their expenditures.
For example, in the year 93/94-97/98 regions coll ected less than 20% of the national
revenue, whereas regions accounted from 34 to 44% of the to tal expenditure in the
co untry and they only covered 25 to 35% of th eir expenditures from their revenue.
Among regions themselves, fi scal capacities vary. Some regions generate more than
others do while some regions generate less. In 97/98-99/00, the federal grants coverage
ranged from 94.36% in Gambella to 9.47% in Addis Ababa which implies th at Gambella
generate less revenue than its expenditure in the country.
Then the objecti ve of this research is to examine the performance of revenue and revenue
generation constrai nts in the Gambella region froin 93/94-04/05. Thi s study is a mixed of
ex planatory and desc riptive researches where secondary and primary data were used. The
primary d ata were collected t IU'ough depth i nlerview a nd focus group discussion from
people that have experience in tax ad ministrat ion. Some community leaders who were
invo lved in tax coll ection were also interviewed individually. The research findings
showed that Gambella region in 00/01-04/05 covered only 7.6% of its expenditure while
92.4% of its expend iture is covered by federal grants. During 00/01-04/05 the federal
grants coverage ranged from 92.36% in Gambella to 98% in Addi"s Ababa. Hence,
Gambella depends highly on federal grants of all the regions due to low institution al
capacity, low economic base and political instabi li ty.
In ord er for the region to reduce this dependency on federal grants; it should increase its
revenue by alleviating political instabi li ties in the region; and weaknesses in institution
such as weakness in audit, accounting and monito ring and evaluation systems of revenue
department of the region. Incentives mechanisms for taxpayers to pay more tax are also
needed to col lect more tax in the region.
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Keywords
Revenue Generation Capacity