Abstract:
Delivery of public services has always been regarded by the policy makers as an important function of public sector in the context of the overall socio-economic development. Effective revenue collection is necessary for the future and sustainability
of Local Government Authorities (LGAs) (Broadbent and Guthrie, 2008) Tax collection methods used by LGAs includes outsourcing private tax agents, incentive schemes where tax agents and villages retain specific amount of revenue collected at village level (Othman and Liviga, 2002). Increasing tax revenues is the most essential activity in every country. Most importantly revenue from taxation is what sustains the existence of the government as it is providing the funding for everything from social programmes to infrastructure development. As people become more sophisticated, they demand the government to provide their needs, in which case the government must as a necessity increase its revenue mobilization to meet such demands. It is for this reason that taxation as a source of government revenue has become so important that there is no country in the world which does not collect tax. However, Fjeldstad et al (2012) stated one major administrative problem today for many councils is their inability to collect fully the revenues due to them. In most council there are huge gaps between collected and projected revenues (Magaro, 2012). This is caused by the integrity of tax employees among other causes. Thus integrity among tax collectors has become vital for effective and efficient tax collections.
The most common source of revenue in local government in Tanzania is intergovernmental transfer. However, LGAs are challenged by the ability to collect own revenue and high dependence on external sources especially from the Central Government for funding their budgets. For instance, Moshi municipal has 8, 165 tax payers and generally fluctuating during the year as pointed out in the Moshi TRA financial
statements for the year ended 2014. Fjeldstad and Heggestad (2011) indicated that Tanzania tax collection is 14.2% of the GDP which is the least figure compared to Mozambique 15.4% and Zambia 15% per GDP. Over the past five years Moshi Municipal Council managed to collect only 10% - 15% of total own source revenue with the remained 80%-85% from the Central government (Magaro, 2012). This gives a proof that the revenue collection in Tanzanian LGAs has not been encouraging and this is attributed by a number of factors. Mbilinyi and Mutalemwa (2010) identified lack of integrity among tax collectors and employees, as being one of the key
factors affecting revenue collection in Tanzania. This has therefore prompted the undertaking of this study on examining the influence of tax employee’s integrity on revenue collection in Moshi Municipality.