Question 3: What are the political economy challenges facing urban authorities in developing countries in generating revenue from local sources? What are some solutions?
Local authorities all over the world are playing an increasingly important role in the delivery of fundamental basic public services. But they are also facing huge challenges, in particular the widening gap between the availability of financial resources and municipal expenditure needs. Local authorities in many developing countries, cities and towns could generate increased revenue from local revenue sources by improving the efficiency of revenue generation and by implementing innovative, revenue-generating mechanisms. What are the key challenges facing local authorities in developing countries’ cities in revenue generation, and what are some solutions to these challenges?
Please post your response below.
Thank you very much to all of you for your valuable contributions to the discussion during these last two weeks.
The posts in this specific question can be summarized and divided in two groups of political economy challenges. The first one related to problems experimented by metropolitan areas often characterized by fragmented local governments and the involvement of several government intuitions, both from different levels and also different agencies.
The second group of posts relates to the political economy challenges involved in a potential increase of land value taxation as a share of revenue. Despite the challenges, there’s a wide set of steps that can be taking towards this goal, starting with the reconsideration of exemptions and abatements, frequent reappraisals of property values (both in real and nominal terms), and a higher incidence of land value over unit characteristics and property improvements, among others.
As for next steps, both the complete online discussions and a final report (to be drafted and published here), will be shared with the members of the Advisory Board for the Mexico City thematic meeting as inputs to the final meeting declaration, one of the key documents feeding into the Habitat III zero draft report.
Thanks again for your very insightful contributions.