The Impact of Fiscal Decentralization on Revenue Performance in LDCs: A Case of Uganda

Abstract

While it is universally envisaged that fiscal decentralization leads to improved revenue performance, a number of constraints like corruption have emerged to cause into question the above inference. This scenario crafts some doubt as to whether fiscal decentralization is still a tenable strategy for improving revenue performances. This study thus sought to examine the tenability of fiscal decentralization as a conduit for enhanced revenue performance of local Governments in Uganda. A mixed research design was adopted. Data that informed this study was purposively sourced from three districts of Uganda; one of which was urban, the other a city and the third was rural. Self administered questionnaires where used for data collection. Data were analyzed using descriptive frequencies, percentages, and correlation and regression analysis methods. Results revealed a positive significant relationship between fiscal decentralization and revenue performance (r=.553**, p<.01) and that Fiscal Decentralization still predicts Revenue Performance in local governments (Beta = .387, Sig. = .000). Recommendations were made to the effect that for improved revenue performance in local governments, Central governments should fully empower local, governments through fiscal decentralization, provide sufficient authority and autonomy to enable them efficiently manage tax collection and expenditure based on their own budgets approved by the elected local councils. Central governments and local governments should also collaboratively monitor and take action on its officials who cause revenue losses.

Keywords: Fiscal decentralization, Revenue performance, strategy, Uganda