Abstract
The government needs funds to finance its activities. This fund is part of the revenue that has been collected from various sources. Local government, like Khulna City Corporation - holding tax, Transfer of Immovable Property fee, trade license fee, advertisement fee, etc are the main sources of income. There are 6 City Corporations and 298 municipalities. Population was nearly 13 crore in the year 2001 and it will be not below 15 crore in 2010. So, financial support can be widened through strengthening revenue earnings with the help of Good Governance.
This study aimed to find out the causes of the low revenue earnings of Khulna City Corporation. Internal taxes, fees and rates are added to the internal revenue. But due to low levels of services and mismanagement, unwillingness to pay tax is increasing day by day. Over the world, where developed countries can not achieve their target of revenue earning with quality of services and facilities, it is unusual that Khulna City Corporation can raise revenue without advancement of service delivery. Poor revenue earning is not the problem of our country but it is a global issue.
What will happen – if inadequacy goes on? The answer will be an echo – No fund, no expense, no development. The study has reviewed the earning sources and identified the major shortcomings. Citizen’s opinion has attained special value. Taxpayers have played a key role in this study because without their participation, strengthening revenue earning would be a dream. In the end, a guideline has been given.
1. Introduction
The journey starts from here. As a journey has a pre-plan, this chapter is the pre-plan of this study. Sequential issues are portrayed here to design a summary of the study. The necessity to earn higher revenue is discussed in the first section where the problems have been narrated. Objectives and research questions have been set to go towards a direction. At last, a concrete design has been formed to foresee the ways.
1.1. Background
With the rapid growth of urbanization all over the world the demand for various services and facilities increased dramatically. However, due to resource constraints, authorities can not provide these services in full swing. In the developing world, the problem is more severe. In the root level municipality is the responsible authority for providing water supply, street lighting, constructing roads, markets, mosques, katcha bazaars and many more. Financial support is necessary to provide these facilities. The government annually allocates a fixed amount for each municipality which is not sufficient for them. The municipality has to depend on the revenue. Revenue, is the income of the government from all sources usually used to pay for a nation’s expenses (Microsoft Encarta, 2004). Municipal revenue only considers all the income earned from a municipal area.
In an article on ‘Secondary Towns Infrastructure Development Project Improves Living Conditions of Urban Poor’, the author states “The gap between service requirements and service delivery was widening. The pourashavas’ own revenue generation capability was weak, and their dependence on government grants was disturbingly high” (Shrestha, 2000). The universal complaint that Municipal Bodies (MBs) in developing countries are in dire need of resources not only for investment to meet the increasing demand of the growing urban population but also for maintenance of the existing services (Hussain, 2004). The ability of the MBs in Bangladesh to raise revenues is far too short because of the fact of the overall poverty of the population. The resources of the MBs are inadequate; infrastructure is poorly constructed and services maintenance is neither enough nor would cover the new expansions. It also failed to make the reluctant inhabitants pay taxes. Inefficient governance of the MBs is partly responsible for this. All the MBs have outstanding dues and poor collection status leaving out the low-income areas. From the massive backlog of the existing liabilities, it may be concluded that governance of the MBs needs extensive uplift to put
the whole system on track. With meager resources and funding from the government, there is a serious need for sustainable municipal finance strategies without further delay. Effective and efficient revenue collection has two dimensions: a policy and an administrative dimension. As experience with tax reform in many developing and transition countries has shown tax policy reform can be achieved in a much shorter timeframe. It also generally is easier to manage and requires fewer resources than reform of revenue administration. This is the reason why donor organizations tend to focus more on the design of a modern tax policy system than on its implementation, which requires the comprehensive reform of tax administration (Engelschalk, 2002).
1.2. Statement
In our country, municipalities need to rely on the fixed amount that has been estimated in the annual budget. Except for some municipalities, none has potential earning sources (like harbors, expensive hotels, airports, etc) other than taxation. Again sources are limited. The municipality usually earns revenue from property tax, trade license, markets, hotels, etc. Holding tax is part of property tax and everyone has to pay it. But the amount is not increasing according to the population size. In the budget year 2003-04, Khulna City Corporation (KCC) earned Tk.2,45,59,106/= but the amount shifted to Tk.1,13,84,455/= in the next year (KCC, 2005). The deficiency states the ineffectiveness of the revenue earnings. Law enforcement might be a tool to strengthen revenue earning for any municipality. Hence development activities can be patronized through inland revenues. Municipality has its own ordinance and under the ordinance, there are some specific rules. Any municipality may collect/gather monetary amounts by enforcing these rules/laws. Our country’s population was 12,92,47,233 (BBS,2001) in the year 2001 and it is not below 14,00,00,000 in the year 2006. Additionally, there are 6 city corporations and 298 paurashaves (BMDF, 2006). So, efficient law enforcement will certainly raise the amount of revenue.
Table 1.1: Paurashavas in the country including 6 city corporations.
Divisions
|
A - Class
|
B - Class
|
C - Class
|
Total
|
21
|
16
|
45
|
82
| |
16
|
11
|
32
|
59
| |
Rajshahi
|
19
|
16
|
50
|
85
|
15
|
5
|
16
|
36
| |
6
|
5
|
13
|
24
| |
Sylhet
|
5
|
5
|
8
|
18
|
Total
|
82
|
58
|
164
|
304
|
Source: BMDF, 2006.
1.3. Research Justification
The overall scenario of financial resource limitation is the same everywhere. But Khulna is suffering much. A subtle tragedy has brought the message of death. There is no sign of industrialization as it was. The city is standing with pride, ‘The Divisional Headquarters’. Khulna Development Authority (KDA) and Khulna City Corporation are already here. The City Corporation is extremely eager to expand its earning sources and increase the amount. As Khulna is the divisional headquarters so some facilities are already here. So there is a hope to expand earning sources.
Because of the limitation of time and information, it will not be possible to do this study for the whole KCC area. So a particular ward has been picked it is ward no 23.
1.4. Objectives
The main objective of this study was to raise the inland revenue of Khulna City Corporation for development purposes. The broad objective has been fragmented into the following specific objectives.
1. Study the existing scenario of revenue earnings of KCC.
2. Identify the causes of inadequate revenue earnings.
3. Propose some guidelines to uplift revenues from specified sources.
Questions
1. Study the existing scenario of revenue earnings
Q1. What is the overall situation of revenue?
2. Identify the causes of inadequate revenue earnings
Q2. What are the reasons for citizens’ reluctance to pay taxes and fees?
Q3. Why KCC can not effectively earn revenue?
3. Propose some guidelines to uplift revenues from specified sources
Q4. What guidelines can be implemented to raise revenue?
Design
The design of research has a greater impact. The same study may have a different design because of geographic location and culture. It is the planned sequence of the entire process involved in conducting a research study. The scenario of law enforcement in collecting holding tax, trade license fee and conservancy rate will be observed. Then issues will be identified as to why law enforcement becomes ineffective. Various law manuals and journals published by the Governments of Bangladesh will be reviewed. An institutional survey will be executed that will help to know the actual scenario and possibilities of incorporating some laws or acts. The first objective will be fulfilled here. In selecting study area information of Khulna City Corporation will be useful because they continuously assess revenue earnings. Variables will be listed on the basis of analysis and questionnaire. When data are extracted both from primary and secondary sources then the analysis will be undertaken and the second objective will be fulfilled. The third objective will be fulfilled after a discussion with the experts.
Table 1.2: Research Design
Research Questions
|
Data requirements
|
Data source
|
Method
|
Q1. What is the overall situation of revenue?
|
Database regarding revenue
|
Annual budget of KCC, KCC database on revenue
|
Literature Review
|
Q2. What are the reasons for citizens’ reluctance to pay taxes and fees?
|
Public opinions, experience of KCC
|
Primary survey, institutional survey.
|
Analysis
|
Q3. Why KCC can not effectively earn revenue?
|
The authority’s view
|
Literature review, institutional survey.
|
Analysis and Literature Review.
|
Q4. What guidelines can be implemented to raise revenue?
|
Discussion with experts and case studies.
|
Secondary Data (World Wide Web)
|
Literature review
And analysis.
|
1.5. Consumer
Every study benefited certain group(s), and so does this study. This study has aimed to overcome the problem of revenue earnings in the application stage of Khulna City Corporation. So, the main research consumers are city corporations and municipalities (Paurashava).
1.6. Structure of the thesis
The thesis will be composed of five chapters and their content is briefly described below:
In the first chapter, the researcher formulates his research framework. Initially, he explores the background setting for the study and based on that, defines his research problem. Then he fixes the general objective for the study and elaborates it by setting specific objectives and corresponding research questions. Afterwards, he clarifies his research design. He concludes the chapter by giving a brief overview of the structure of the thesis.
Chapter two, deals with relevant literature for this study. It illustrates what is revenue and distinguishes between municipal revenue. A brief review has been written on Local govt. finance in Bangladesh . The author has also reviewed the Paurashava Ordinance, 1977. Besides some study has been reviewed on strategies to overcome low earnings.
Chapter three presents the methodology and study design techniques employed in this research.
Chapter four presents the profile of Khulna City Corporation. This chapter will be a brief description of the corporation including the evolution, taxation system, key functions, and obligatory responsibilities.
Chapter Five presents the facts and figures of the surveyed urbanites.
Chapter Six presents the analysis phase. Analysis based on income and expenditure, share of revenue in expenditure, per-capita expenditure, and problems will come out, both from the taxpayers and tax collectors.
Chapter seven represents the recommendation and conclusion.
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