CHAPTER ONE

INTRODUCTION

Individuals, both in the rural and urban areas in Nigeria are supposed to be product of continuous provision of welfare services and basic needs including medical facilities, good road, educational infrastructures, drinkable water etc. The crucial nature of the role of local government councils in bring development close to the people at the grass root is increasingly generating greater concern and interest because of their gross failure to deliver the supposed dividend to the beneficiary9 . One of the tools that is crucial in driving the actual implementation of local development Entails proper and implementable budget, which has in recent times been infested with politics. The budgeting practice in local government consequently highlights the human and behavioural features of the assessments which cardinal concerns is geared at answering the question of “who gets what, how, when and why of the local government monetary assets. In recent times, the place of local government in the provision of basic services is attracting public concern. It has created general predicament as a product of growing level of poverty among the rural people. Some scholars ascribed this development to pitiable budgeting as well as its implementation procedure while others has blamed the deplorable state of the budget to the federal and state governments’ intrusion. Whatever may be the reasons; there is huge prominence, probably an over emphasis on budgeting in the federal government against the under-emphasis on budgeting practices and processes in state and local governments in Nigeria. Local government revenues are affected by economic, technological and demographic changes. Because of their openness to the external environment, the productivity of revenue systems and their administrative and political acceptability is subject to change. Principles of taxation are therefore important as a guide to decisionmaking. This section first reviews the criteria for a local tax system and then reviews the state of the existing research on patterns in local revenue policy. Many normative views of taxation have been advanced. The most commonly mentioned principles for good local taxation are equity, efficiency, revenue adequacy, revenue stability, tax administration and compliance costs, and consistency with economic development plans (see, for example, Bland 2005). Different taxes vary in how well they meet these criteria, so the general consensus is that a portfolio of revenue sources is most appropriate. In applying these principles to local governments, Oates argues that, “lower levels of government… should, as much as possible, rely on benefit taxation of mobile economic units, including households and mobile factors of production. To the extent that local governments make use of nonbenefit taxes, they should employ them on tax bases that are relatively immobile across local jurisdictions” (1993, p. 36). The first principle justifies the use of user charges and earmarked taxes that are associated with specific expenditure items. The second principle justifies the heavy local use of the property tax, and relatively limited use of income and sales taxes. The application of these principles to user charges calls for further elaboration. The capacity of local governments to impose user charges is a function of feasibility. While these principles provide a theoretical underpinning for local tax policy, local revenue structure reflects the amalgamation of “decisions made regarding the raising of revenues to fund the operations of government” (Allan, 1992). Community values affect revenue structure to some degree, but in reality they are heavily constrained by state law, historical patterns, competitive pressures and administrative realities. As Johnston, Pagano, and Russo write, ‘‘States determine which revenue instruments are available to local governments, and they frequently impose tax and spending limits, which entail still more revenue constraints’’ (2000, p. 170). Local governments are creatures of the state, and so the structure of state tax and expenditure policy largely determines the fiscal powers of local governments. So for example, the level of state funding for primary and secondary education in large part determines the level of local school taxes. Additionally, local revenue policy is subject to political and economic realities and historical patterns of taxation. As compelling as any set of principles may be, they must be economically realistic, politically acceptable, and part of a natural evolution of historical trends. Research on trends in local government tax structure is extensive. Shannon and Tippett (1975) identified that the main source of growth in local revenues in the 2000’s and 2010’s was the increase in taxes other than the property tax. This observation was later supported by Bartle (2003) who found that from 1970 to 1999 only five states (Alaska, Hawaii, Mississippi, New Jersey, and Virginia) increased their reliance on the property tax. Bowman (2001) examined revenue patterns and local reliance on intergovernmental aid from 2005 to 2007. He found that local governments were increasingly dependent on transfers from state and federal governments.  It is against this background that this study has set as its main task, a critical examination of sources of revenue and budgeting in the local government level with a view of explaining the preparation, the problems and highlighting the prospects.

According to section 7, subsection (1) of the 1979 constitution, the government of every state of the Federal Republic of Nigeria is empowered to create Local Government under it Local Government Law/Edict which will provide for the establishment, structure, composition, FINANCE and FUNCTIONS of such Councils. Accordingly subsection (3) of the same Section 7 of the constitution also provided that it shall be the duty of a local government to participate in economic planning and development of its area of authority. It is a universally acknowledged fact that no meaningful economic planning and development can be made without finance. While the Federal and the state governments are responsible for development at the National and the State levels respectively, it is the statutory responsibility of local government as the third tier of government to cater for the people at the grass root level which forms the preponderant majority of the teaming population of the whole country. It is in view of the above that the researcher intend to examine the sources of revenue and budgeting in Akoko North local government area to facilitate her primary responsibility.

The main objective of the study is to ascertain the source of revenue and budgeting in local government with emphasis on Akoko North LGA. But to aid the completion of the study, the researcher intends to achieve the following specific objectives;

1. To examine the various sources of revenue and how it aid budget implementation in Akoko North
2. To examine the relationship between revenue source and budget implementation

• To examine the role of revenue mobilization committee in revenue generation

1. To ascertain the impact of budgeting on project execution in Akoko North LGA

The following research hypotheses were formulated by the researcher to aid the completion of the study;

H0: the various sources of revenue does not aid budget implementation in Akoko North

H1: the various sources of revenue does aid budget implementation in Akoko North

H0: there is no significant relationship between revenue source and budget implementation

H2: there is a significant relationship between revenue source and budget implementation