Tanzania is currently implementing local government reform aimed at improving public service delivery. An important component of the reform is increasing the fiscal autonomy of local authorities. This policy is encouraged and partly initiated by the donor community. The purpose of this article is to explore the extent to which we can expect that increased fiscal autonomy will improve the efficiency and responsiveness of the public sector. The paper concludes that it tis unrealistic to expect that the present administration in many local authorities in Tanzania have adequate capacity and the required integrity to manage increased fiscal autonomy. In fact, there is a real danger that, in the absence of substantial restructuring of the current tax system combined with capacity building and improved integrity, increased autonomy will increase mismanagement and corruption.

Odd-Helge Fjeldstad

Research Professor, Coordinator: Tax and Public Finance