Is small beautiful? Village level taxation of natural resources in Tanzania

Abstract

This article examines collection of natural resources revenue by village governments in Tanzania as part of a decentralisation reform. An analysis of empirical data in the form of taxation records from 14 villages, which collect and retain revenues on natural resources utilisation suggests that decentralising revenue collection to the lowest local government tier may yield: (i) considerable increases in revenue collection; (ii) increased transparency in public finances through requirements that village governments document their incomes and expenditures to the villagers; and (iii) a financial surplus that is used to finance public services at the village level. The evidence presented in this article suggests that decentralising taxation to the lowest local government tier may be a viable approach to enhance revenue collection on the utilisation of relatively low value natural resources, and assure that a share of the collected revenue is used to finance public services. Copyright © 2007 John Wiley & Sons, Ltd.