0w2010 01 RESUM EJECUTIVO 03 DEFcarta ang
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Second Global Report on Decentralization and Local Democracy. GOLD 2010 EXECUTIVE SUMMARY
activities and property, ensuring a better division of value added taxes (VAT) and collaboration in implementing taxation of informal sector activities. Associate local governments (where they are not already) to the management of tax collection, and increase the flexibility of the “unified treasury” principle or even abandon this practice in countries of Francophone tradition. However local governments must, for their part, firmly commit to mobilizing local resources as this is the only sustainable way of reinforcing the financial autonomy of local authorities. They must take the initiative in presenting proposals to the State for improving their tax and fee management capacities, and improve accountability and transparency. •
Better definition of the rules for transferring financial resources from national to local authorities. Given the important share of intergovernmental transfers in local budgets, the rules that govern these transfers should be as predictable and transparent as possible. A minimum yearly level of public resources must be assured to local authorities, by the State, based on an objective formula negotiated between the two parties. Such a formula should take into account the need to encourage local authorities involved in local economic development, as well as the need to address equity and equalization between local authorities with different economic levels and/or facilities. To this end, the dialogue and partnership between the central and local government on the management of transfers and shared taxes must be improved. This dialogue could follow the pattern used in the national committees on local finances created in some States (in particular within the East Community of West African States-ECWAS),
in which representatives from the Finance Ministry, the Ministry in charge of local governments, and the national association of local authorities are brought together. Local governments need to be consulted before the annual budget law is adopted, and this law should undergo a transparent design process. •
Make access to loans and financial markets easier for local authorities, make the regulating framework more flexible, adapt financial tools to local authorities, diversify revenue sources, encourage both the mobilization of private resources for investment in public services, and public-private partnerships. Local governments must, for their part, improve their internal accounting because to access financial markets, they must have the ability to manage finances and behave in a fiscally responsible manner. They must also improve their local governance in order to inspire the confidence of financial operators. However, it should also be the responsibility of the central government to promote instruments that facilitate local authorities’ access to loans. The development of financial institutions specialized in granting loans to local authorities or in the intermediation of their access to the financial market is an important first step, provided that the work of these institutions is well evaluated. Local capacities to improve land management and to mobilize capital investments need to be strengthened. African local governments should be surveyed to assess how they group applications for access financial markets with technical support organized in the framework of a development fund for cities.
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