An Assessment of Revenue Generation Capacity in Gambella Region: Achievements and Constraints

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Addis Ababa University


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.



Revenue Generation Capacity