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This paper examines the growing role and impacts of private tax collection under fiscal decentralisation in Uganda. Based on evidence from six rural councils, three aspects of privatised tax collection are examined: (i) the impact on the nature of fiscal corruption; (ii) the problem of overzealous collection, and (iii) the challenge of assessing revenue potentials. While possibly meeting short-term demands for local revenue growth and stability, the present form of private tax collection appears to transform the nature of fiscal corruption by reducing corruption at collection point and transferring the problem into the district administration. Moreover, while the charge of overzealousness permeates historical and theoretical work on privatised tax collection, the Ugandan experience casts doubt on its general validity. Instead, perverse distributional effects are the most likely cause of deteriorating state-citizen relations in rural Uganda. Finally, the paper considers the merit of the prediction of private collection as a preferred contractual choice for certain indirect taxes, suggesting that problems of asymmetric information in assessing the revenue yields of most rural markets are exaggerated.

Odd-Helge Fjeldstad

Research Professor, Coordinator: Tax and Public Finance