Local Revenue Sharing: A one step towards empowering Local Governments in Liberia￼
Last week I read in a local newspaper that 27 lawmakers from the lower house have passed a bill seeking local revenue sharing to foster decentralization.
By Mohammed M. Bamba, Jr, Contributing Writer
Amid the growing public disenchantment with in their lawmakers for so many bad legislations over the years, I think we all can take a little deep breathe for this one. I have always held the conviction that there are some nationalists in the national legislature who are determined to make this country better. In all fairness , a republic like ours will at all times need the very best from the legislature because the role it plays has an overreaching impact on how our national governance system work.
Over the years, the country has been a victim of bad laws and concessions that only favor the concessionaires while the ordinary people bear the brunt of these bad laws. The state of our governance process is evolving every year and the long road to total decentralization is gradually taking shape with such massive decision emanating from Capitol Hill. This move by the lower house is welcoming and when it’s concurred by the senate, it will show our commitment as a government and people to implementing the Local Government act of 2018.
This bill when passed into law seeks to build equity in revenues annually transferred by the central government to local governments for undertaking development activities as well as for implementing devolved and delegated functions in furtherance of decentralization.
It will also help to provide equitable sharing of natural resource revenues between the Central Government and Local Governments, as well as between Local Governments and sub-local government units; and create incentives that encourage Local Governments to be effective and efficient in tapping their own revenue mobilization potential.
This bill will break the dependency syndrome that counties, cities, and towns have been suffering from for years and will begin to see a just share of revenue generated most especially from the various locales.
Local Revenue sharing is the distribution of revenues between central and local governments, as well as between local government and sub-local government units.
The bill stems from Chapter 4 of the Local Government Act of 2018 on “financing local governments” which calls for revenue sharing between the central and local governments as well as between local governments and sub-local government units based on formulas to be recommended by the Local Government Fiscal Board and enacted into law by the Legislature.
The Local government Fiscal Board is an autonomous board that makes annual recommendations to the legislature with a copy to the Minister of Finance and the Minister of Internal Affairs of annual grant allocations to counties, cities, and townships for the grant fund, and to ensure that the financing of local government is equitable and transparent.
This bill when passed will motivate the cities, townships, and counties to strengthen or complement the effort of the Liberia Revenue Authority in closing some of our tax leakages thus, strengthening the tax base of the country.
As the saying goes, “Alone we can do so little; together we can do so much”.
For so many years we have witnessed our counties, cities, or even townships being a place of huge revenue generation for the central government but in return, we have seen no positive impact on these cities, counties, and townships. They are left to fetch for themselves or depend on the central government wholly for handouts that show little or no impact on the state of development of these various cities, townships, and counties. This bill when passed will hold the central government accountable to remit by the formula that will be designed by the Local Government Fiscal Board in line with the Ministry of Finance.
As we gradually move towards devolution in the future, these are signs that we can rely on to prove the government’s commitment to fully implementing the local government act of 2018. Though many will still say that it’s the central government holding the purse at least it’s a gradual process to having devolved authority achieved and we see this as one of the many steps to that.
Imagine right here in Freetown, the City Council is rolling out what they termed as a “Points – based property valuation “ methodology that has taken the number of register properties for tax registration from 57,000 to about 110,000 in 2020 lest to talk about current data which has increased and place Freetown on a path to “Reform”. This model has worked for Mayor Aki Sawyer because it’s easier to administer when you have full authority as a local government. Freetown, Accra, and other cities are doing the heavy lifting but here in Liberia, it’s a taboo to give cities full authority in revenue generation after 175 years of existence as a country.
A country like the Philippines has served as a shining example for decentralization worldwide. They have made sufficient strive in achieving devolution which has over the years empowered the local government to carry on development initiatives. Since 1991, the Philippines have devolved responsibility for administering local government. This has given local government entitlement of 40% of gross mining taxes, royalties, forestry, and fishery (Local Government Code of Phillipines, 1991). In the Philippines, if natural resources are situated in an independent city then the city government will receive 65% of the revenues. This has worked for the people of the Philippines and any country aspiring to devolve responsibility must look at the success story of decentralization in the Philippines.
Liberia has five more years to go before the local government has the exclusive right to collect taxes after we have exhausted the first five years (2018-2022) according to the local government act – 2018 sub-section 4.5(b) which authorizes the Central Government to continue to collect taxes for the next ten (10) years. Accordingly, for the next ten (10) years, all taxes shall continue to be collected by the Liberia Revenue Authority (LRA) of the Central Government (LGA,2018).
We just celebrated our independence a few days ago but are we free? In this age of globalization cities in Liberia are being cornered to not venture around collecting property tax only to be dependent on the central government. Are we independent? We can’t pretend to ignore the fact that the financial conditions of local government in Liberia have remained poor while the central government continues to play a major role in collecting property taxes with little or no benefit to the local government. The fact remains that Real Property tax is the main source of local revenue and the rest are just complementary. That’s why the Liberian senate needs to concur immediately to have local government empowered for the next five years because all taxes collected by the Liberia Revenue Authority for Central Government will be co-owned by Local Governments and shall be shared with them in a fair, transparent, and accountable manner, considering roles and responsibilities at both levels of governance.
The bill when passed will empower local governments to share all revenues that are generated and collected from non-natural resource sources such as real estate taxes, income taxes, licenses, permits, professional fees, leases of government assets; and natural resource-based revenues collected from the operations of concessionaires and companies covering areas such as forestry, iron ore, gold and diamonds, and oil and gas.
According to the bill, all non-natural resource revenues collected shall be shared between the Central Government and Local Governments, as well as between Local Governments and sub-local government units (municipalities) by the utilization of the “Indicator-based model.” The indicator-based model takes into consideration the population index, poverty level index, Land Area index, Development indicator index(Health and Education), and fiscal efficiency index.
For Natural resource revenue sharing should be distributed by the “derivative based-model” that calls for 10% to the county of origin of the natural resource revenues; 25% to all the fifteen (15) Local Governments, including the county or origin; 60% to the Central Government towards its general revenues; and 5% to communities and/or counties affected by the exploitation and transportation of the natural resource for shipment overseas or processing within Liberia.
Currently, we have close to 90% of revenue generated from natural resources going straight to the central government with some counties benefiting less than 10 % under the auspices of “corporate social development funds” which can fluctuate based on the potential of discovery or production in concession areas.
For instance, how much have the people of Grand Cape Mount benefited from Bea Mountain when in fact Bea Mountain is supposed to contribute US 200,000 between contract years 5-10 to the community development fund. This amount according to the contract should be paid to the government annually and in advance on or before February first (Mineral Development Agreement between Bea Mountain and the GOL). Such funding should be used to develop the community or county of the concession. Go Cape mount today and see how underdeveloped the county is amid Bea Mountain operation for the past 10 years.
The Liberian senate that each member takes home as a constituency visit of 30,000 USD can do the moral thing to concur with their accomplices from the lower house so they may not have to worry no more about using some of the 30,000 USD to build substandard latrines or markets in their various districts or counties. Give teeth to the local government to do the heavy lifting while you focus on the three cardinal functions of lawmaker (Representation, Lawmaking, and oversight). Your job is not to build roads, latrines, schools, Youth Centers, or intellectual forums. When the counties, cities, and townships are empowered they will do these things and you provide oversight.
The country stands more to benefit when this law is passed. We don’t need to tell you that this revenue sharing will harness the superior revenue-raising ability of counties, and the city’s tax systems to the local need for more diversified, administrable, and economically responsive revenue sources. We know this bill will be fought by anti- decentralization proponents but remember when you are voting against it; you are voting to stagnate local development, to deny the people their just share of what might impact their livelihood than the current state of dependency.
On the other hand, we are also aware that there are patriots in the Liberian senate that will concur with this bill in the country’s best interest.
The enormous benefit of such milestone legislation is overwhelming and will just place us among countries that are making serious efforts in advancing local government on the global stage. Once money is placed in the hands of local government, it will fast-track national development.
The Author is a graduate of the Cuttington University School of Graduate and Professional Studies with a Master’s in Local Government and Rural Development Administration. He is an Administrator and a politician and can be reached at [email protected]