Local Revenues and Expenditures from an Environmental Perspective

1. Local Revenues and Expenditures from an Environmental Perspective Priya Shyamsundar

2. How do local governments generally do in terms of revenue collection and disbursement? Local Governance in Developing Countries, Edited by Anwar Shah (2006) The role of environmental resources in local revenues and expenditures Nepal�s Community Forestry Funds. Do they benefit the poor? Pokharel (2008) Road Map

3. Share of local governments in consolidated public expenditures Share of local government expenditures as part of GDP How strong are local Governments?

4. Local Government as share of consolidated public expenditure (Shah and Shah, 2006)

5. Local Expenditures as Share of GDP (Shah and Shah 2006) China has LG responsible for social security and other services, usual service delivery (municipal) and also has a bigger role in economic development. Uganda � education accounts for 40% of local expenditures; indi and S. Africa � mostly municipal servicesChina has LG responsible for social security and other services, usual service delivery (municipal) and also has a bigger role in economic development. Uganda � education accounts for 40% of local expenditures; indi and S. Africa � mostly municipal services

6. Composition of local Revenues In sample countries 40% from taxes, 10% from fees and charges and remaining from transfersIn sample countries 40% from taxes, 10% from fees and charges and remaining from transfers

7. Composition of local tax revenues Sample countries raise 32% of taxes from property. For all developing countries property taxes amount to .5% of GDP � untapped resources relative to OECD countries (2% of GDP) Fiscal transfers account for about 60% of local revenues in all developing countries and 32% in OECD countriesSample countries raise 32% of taxes from property. For all developing countries property taxes amount to .5% of GDP � untapped resources relative to OECD countries (2% of GDP) Fiscal transfers account for about 60% of local revenues in all developing countries and 32% in OECD countries

8. With exception of China, Poland and Brazil, local government have limited functions Decentralization in service delivery and expenditure management Very little decentralization in revenue collection � own source revenues limited Considerable variation across developing countries � scope to learn Taxes are a very limited source of revenue � transfers dominate over taxes and user fees. Limits ability to be accountable to local users Big Picture Leaders lobby for greater transfers but are less focused on increasing own tax baseLeaders lobby for greater transfers but are less focused on increasing own tax base

9. Can local resources be exploited to increase local revenues? An Example from Nepal

10. Deforestation in the 70s/80s lead to interest in decentralization 1993 Forest Act facilitated creation of �forestry user groups� (FUGs) Currently some 14000 Suman Basnet Local Resourcesin Nepal � Understanding Income and Expenditures from Community Forestry

11. Develop a forestry operational plan and carry out operations Create rules for management, harvest and protection of forests Regulate household collection of products for subsistence purposes Sell Surplus timber and fuelwood in the market Use Money to create a Community Fund Forestry User Groups

12. Rapid Growth in FUGs (Kanel and Kandel 2004) 1.6 million HHs participate in FUGs FUGs manage 25% (1.1 million ha) of forests

13. Some evidence that forest cover has recovered in many areas Community forestry seems to help households with assets (land and livestock) more than the poorest households Community forestry funds are a significant source of local revenues Current Evidence on Impacts

14. Contribution to local revenues (Kanel and Kandel 2004) 2 million USD income from these forestry user groups available to local communities (nearly 2 billion nepali)2 million USD income from these forestry user groups available to local communities (nearly 2 billion nepali)

15. Assessed 100 CFUGs Examined income and expenditures Average annual FUG income � Nrs 44500 (about USD 500) Add equivalent of 1/3rd of annual VDC funds Current government statistics under-estimate forest contribution to local revenues A Micro Examination of Pro-Poor Use of Forestry Funds (Pokharel 2008) Previous estimate was about 175 USD per CFUGPrevious estimate was about 175 USD per CFUG

18. The glass is half full�.

19. Fund Benefits Poor Versus Non-Poor (Pokharel)

20. Assess non-timber forest product and fuel wood extraction restrictions Pilot new strategies for timber harvest and sale � subsidies don�t help the poor Re-examine rules for how micro-credit is distributed between the poor and non-poor Moving Forward

21. There are significant opportunities for raising local revenues Local revenues can enhance the ability of governments to respond to local needs However, questions about expenditures are distributed to the poorest remain Scope for welfare enhancing reforms in revenue collection and distribution But�� Local Government and the Environment � Lessons

22. The role of local government limited in community forestry Representation of government in FUG executive committee and vice versa may be appropriate Different decision making authorities can create in-efficiencies Legal clarity required over conflicting rulings of different acts such as self-government act, mining act etc Wither Local Government?