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Tuesday, 6 October 2009

The challenge of defaults, 2nd Edition

We have previously touched on the problem of defaults in the context of agriculture, and how it has contributed to high costs of finance. The Credit Bureau is partly designed to address this problem. A recent story illustrates why this is a wider problem. Lusaka City Council has revealed that its residents owe K30 billion in unpaid ground rates. I suppose the residents have concluded that if central government does not pay the council, why should they ? The main lesson of course from all this is that these challenges should give pause to those who see fiscal decentralisation as a panacea.

Lusaka residents owe LCC over K30billion (Source : ZANIS, October 1, 2009)

Peri-urban areas in Lusaka are owing the Lusaka City Council (LCC) over K30 billion in unpaid ground rates. LCC Public Relations Manager, Chanda Makanta disclosed to ZANIS in Lusaka today that the residents have defaulted in paying ground rates hence the accumulation of this money.

Ms Makanta said this has made it difficulty for the council to provide services which people from these areas need. She said due to the debts the council is unable to construct and maintain road, provide water facilities and other things.

Ms Makanta said it was for this reason that LCC has introduced good incentives for residents to encourage them start paying the ground rates to the council.

She said the council is giving a 30 percent discount to all residents who will pay K50, 000 monthly rates between now and 31st December this year. She added that another 30 percent will be given for every extra K50, 000 that will be paid while other households goods like cooking oil, mealie meal will be given depending on the amount paid.

Ms Makanta said apart from getting the money to provide services to the residents, paying ground rates will enable the residents be issued with occupancy license. She said occupancy licenses will provide a guarantee of ownership for their houses and properties.

Ms Makanta has further disclosed that the mayor of Lusaka will tomorrow launch the progaramme in Bauleni compound.

2 comments:

  1. Cho,

    Lusaka City Council has revealed that its residents owe K30 billion in unpaid ground rates. I suppose the residents have concluded that if central government does not pay the council, why should they

    The reason they have to pay the council, is because the central government doesn't.

    However, they already pay taxes to the central government, so in a way they shouldn't have to be taxed twice and pay taxes to the council as well.

    If the councils received $550 million directly, they would have larger budgets than they have now, even without taxing local people.

    ReplyDelete
  2. MrK,

    I thought we have already settled two points :

    1. Local taxes are ALWAYS present in more devolved countries. I cannot think of decentralised example where councils never raise taxes.

    2. Decentralisation without levying taxes appears not to work - see the discussion we had here Is fiscal decentralisation the answer?

    ReplyDelete

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