Case Study Madagascar

SAHA - Rural development program - Intercooperation Madagascar

Local Tax System for the Empowerment of Communes in Madagascar

Antananarivo, November 2010

Contributors: Parfait Randrianitovina, Gaby Florent Robert, Estelle Raharinaivosoa (all SAHA), Annette Kolf (Intercooperation)
Peer review: Burkina Faso and Bangladesh

Video Intro
Have a look at the video intro to get an overview of the case study and its contents.

Fact sheet

1. Context

Since 1991, Madagascar has taken the path of decentralization. This latter is materialized in the national territory sectioning into decentralized territorial collectivities (CTD/DCTs) and in the emerging of civil society organizations (OSC/CSOs). Since 1995, 1549 communes have been implemented in order to deliver a local public service and to valorize local development dynamics, within a context in which the majority of the rural population is living in poverty conditions.

The country is provided with a national policy for decentralization and devolvement (PN2D) that includes 3 strategic axes: the STD’s support to the CTD, consolidation of decentralization, citizen’s participation and developing of partnership.

Despite the significant efforts for decentralizing, the power remains strongly centralized and the civil society organizations do not yet manage to assume the role of a counterpower.

Some key competences have been transferred to the communes, yet not in totality. For instance, in the field of Health, the local services’ staff is managed by the decentralized technical services (STD/DTSs). The same figure is observed in the Education sector, the commune’s competences being limited to the implementation and the maintenance of the infrastructures related to those services. In matter of Environment, any natural forest estate’s propriety has been transferred to the communes and the few available personnel for the forest managing are under the STD/DTS’s supervision. Consequently, the communes should at each turn negotiate the support and the collaboration of the STD/DTS, so as to deliver services that respond the best to the citizens’ concerns.

Such mechanisms as annual operation subvention, specific subvention (destined to Civil Status Division, schools, health centers, land sector…), exceptional subvention ( given to communes that present investment projects which are approved by the Decentralization Ministry), investment subvention (Local Development Fund) have been developed but they do not suffice to ensure the communes’ financial autonomy.

Since 2007, the State has operated a reform of the local tax system in view of offering more autonomy to the communes.

The statutory instruments specify that communes’ accounts should be provided with the following revenues: property taxes on constructed structures (IFPB), property taxes on land, a part of the refund from local products, a part of the mining royalties, fees and taxes, combined taxes which are fixed taxes for non formal sector, tax on drilling licenses…

The list goes on but concretely those revenues stand for less than 5% of the 2009 Budget Act if one refers to the situation primary to the political crisis. This is due to the lack of fiscal tools that could be mobilized by the communes, and mainly to the very low ratio of local taxes collection along with the low rate of levies that are voted by the communal deliberative body.

In general 80% of the commune’s budget is allocated to the operations and 20% to the investments. So that most of the rural communes present a despairing initial budget each year after sending to the Decentralization Ministry an equally pitiful administrative account.

The question is “how to help those communes to take the challenge of the financial autonomy that guarantees communal services’ effectiveness and ensures a concerted local development?” Such is the purpose of the present note that re-counts Saha Program’s practices in this area.

2. Activities and approaches

SAHA’ s intervention within this thematic aims in general the significant amelioration of the commune governance (financial management transparency, effectiveness of communal services, social accountability, local actors responsibilization…), and the promotion of the local economic development. Specifically SAHA supports the communes to exploit more their fiscal potentials (census, tax collection and education, land topics…).

Since 2006, SAHA has directly accompanied 40 communes and indirectly supported other 110 (through communes’ cooperation). Along with the communal officials and the local authorities for the mobilization of the communes’ own revenues, it has realized the following activities:

• setting up of a standard of service: it is about revisiting the communal services and reorganizing those according to the government’s and the citizens’ priorities depending on the available resources.
• training of the commune’s secretary treasurer/accountant (STC/STA) and the financial management computerization
• supporting the communes to lead advocacy with the Public Treasury for the timely refunding of the part of taxes and royalties due to be reversed to them.
• accompaniment of the fiscal census and of the linking with the public agent about tax collection
• accompaniment of the participative process for the communal budget elaboration and execution
• accompaniment of the local actors reflection and of the implementation of the local economic development strategy ( focus on land, mining, economic sectors, job creation, market creation…)
• documentation of good practice and participation to political dialogue

Beside, SAHA strengthens the rural civil society organizations through:

• the citizenship education
• the animation of public debates on topics of general interest (rural security, bushfires, land…)
• the support to the peasants who are working in a growth sector (silk, honey…)
• the support to the citizens and groups of citizens so that they interpellate the communal officials.

Actions at local level are completed with interventions at national level. Thus, SAHA contributes to the joint ministerial reflection for the implementation of the decentralization policy in order to territorialize the public investments (roads, communication, dams, irrigation canals, electrification…) so to help the communes expand their tax bases.

And at last, when political decisions are made (legislative texts review, land desk, publication of harmonized toolkits, Mining Code specifying the communes’ shares on the mining royalties…), SAHA accompanies the changes appropriation at communes’ level so as to strengthen even more the communes’ financial autonomy. This is the reason why SAHA has specifically supported the communes to include the land management as a communal service, and also to develop a strategy dedicated to small mining exploitation.

3. Experiences

The outcomes from SAHA’s support in matter of governance amelioration and of local economy promotion are:

• computerized and reorganized communal services provided with more qualified human resources
• trust between the population and the elected representatives through the citizens’ participation to the public affairs management and the frequent descent of those latter in the community to listen to the population’s concerns and to share information.
• emergence of the local economic dynamics that valorize the growth sectors (silk, honey…) on which the poor can hang.
  

More particularly in matter of own resources mobilization and allotment the following outcomes are to be quoted:

• the fiscal census and tax collection system is neatly improved: the communal elected representatives ask the citizens to establish a legacy list and declare it in the village registering notebook ( participative declaration). On this basis the citizens receive the status of the levy they are imposed which allows them to pay the due taxes.
• The budget of some supported communes has neatly increased, the amount doubling in four years. This has also improved the ratio Operating budget/Capital budget from 80/20 to 20/80.
• A better resources allotment in response to the population’s priorities: the decisions made by the elected representatives derive from public debates during which the citizens have voiced their opinions as for the local concerns.

SAHA initiates a direct partnership with the communes by responding to an initial request for support. On this basis the two counterparts both consider in depth (1) the vision of development (2) the commune’s role in the achievement of the defined objectives (3) and the tenor of the support. The collaboration is formalized by a multi-annual Contract Program with the possibility of an adjustment according to the evolvement of the supported dynamic.

Then SAHA makes available fort the communes some accompaniment providers according to the support and counseling needs that had been identified together. Those providers are hired by the communes themselves. At the start managing the providers is not obvious to the communes; thus, SAHA helps them in the definition of the specifications, in the monitoring of the provided services and in the production and use of simplified managing tools.

SAHA co-finances the activities that are included in the Contract Program and remits the granted funds in the commune’s account. This approach of the financial flow involves a risk of use diversion of the funds because the law states that in case of insufficient funds the commune should pay at first the compulsory expenditures. That is to say in case the disbursement of the State subvention is delayed the grants deposited in the communal fund could be used to pay the agents’ wages. To remedy this situation SAHA proceeds to a periodic monitoring of the commune’s account with the possibility to order a systematic audit from an external firm.

Finally SAHA strengthens the competences of the accompaniment providers and helps the commune better collaborate with the STD/DTSs, the regions and the ministerial departments that are assigned the mission of perennial accompaniment of the communes. For instance SAHA has facilitated the linking between the communes, the tax centers and the Chief of District in the view to mobilize the local tax revenues. SAHA has also facilitated the integration of the Land Desk as a communal service by developing the collaboration between the commune and the Domain and Topography Services along with the National Land Program.

For the scaling SAHA has adapted his intervention (1) by organizing sessions for experiences exchanges between the communes; (2) by documenting and capitalizing on the good practice; (3) by relaying at political dialogue level and at international level the validated experiences; (4) and by collaborating furthermore with the other PTF/FTPs.

Other difficulties are related to the fragility of the governance institutions in general so that with each political leaders change the first impacts are weakened and the achieved outcomes go up in smoke, everything getting to be started over.

Thus, SAHA is more and more working in the capacity building of the commune’s permanent agents in order to maintain the achievements. The Program also strengthens the citizens’ abilities to interpellate so as to ensure continuity beyond the elective representatives’ mandates.

4. Lessons learnt

1. The demand approach opens a space for discussion between the commune and SAHA, each counterpart displays his ideas and interests. The demand changes over time and requires both counterparts’ abilities to adapt according to the evolving of the achievements and the context.
2. The long lasting accompaniment has helped the elected representatives adopt a new working method along with a new and more efficient organization of the communal services. Therefore the elected representatives have for instance made a good investment of the own revenues.
3. It is important to work in one hand on the capacity building of the representatives and in the other on the mobilization of the civil society organization to play a role in the public affairs management. Indeed, if the support only aims the elected representatives’ behavior changes the outcomes would not get to be perennial without a strong civil society that plays the role of a counterpower. Beside, the citizens’ satisfaction regarding to the communal service along with the availability of socio-economic infrastructures increase their motivation to pay their taxes.
4. The fiscal census and the tax collection are not an objective in itself; in addition one should be able to invest the collected revenues according to the emergencies, the priorities and the unifying projects that have been identified by the citizens. Thus, the latter as well as the representatives should be accompanied so as to be able to make concerted decisions. For instance the actors have learnt to define and make use of clear and transparent criteria for prioritization to settle the choice as for the projects to be achieved (bridge, dams, school, drinking water supply…)
5. It is important to involve the STD/DTS in the technical advising of the communal investment in order to ensure the technical feasibility of the projects, their workmanlike achievements and compliance with the standards. Setting the relation between the commune and the STD/DTS requires an external facilitation. Indeed the law states that the STD should bring support and counseling to the elected representatives but in practice the STD are not compelled to respond to a request from the latter. SAHA has dealt with this aspect case-by-case according to the identified thematic issues: land, education, health, natural resources management, mining… The sustainability of this collaboration implies behavior changes from the two counterparts. In another view, it could be supported by the introduction of the obligation for the STD to respond to the communes’ request in the statutory instruments.
6. It is all the same important to help the communes make an analysis of the fiscal chain and of the ratio cost/benefits to allow them to prioritize the mobilization of the high performance taxes. In the case of the communes which are partners to SAHA the property taxes and the refunds from the agricultural products form the fiscal potentials.
7. In many cases the communes pool their means to deal with the matter of the tax system. This way, the work of a single provider can benefit to several communes, the statistics datas are managed and processed within the commune that is equipped with computer facilities. SAHA has also accompanied such initiatives. This collaboration between different communes has led the local actors to develop a shared view of their territories’ development and to identify the common issues to be valorized altogether: rural tracks, rural security, community-based tourism…

5. Conclusions

The financial resources form the sinews of war when it comes to concerted local development. Nevertheless the commune is no State within a State; it contributes to the development of its territory, of the region and the nation.

One of SAHA’s comparative assets consists in its presence at local level. For a larger diffusion of its experiences, SAHA actively takes part to the political dialogue and develops strategic alliances with other donators. This allows him to influence, in a certain extent, the framework conditions and the implementation of the decentralization policy, on the basis of real experiences.

The promotion of collaboration between the different actors about the tax system issue needs time but it is essential and necessary for obtaining sustainable outcomes.

The scaling of the approaches and the good practices requires the implementation of a sustainable device for the communes’ accompaniment. The current accompaniment device that SAHA has developed within a commune cannot be spread to all the communes in Madagascar. Not only is the procedure expensive but the national competences in matter of communes’ accompaniment are not sufficient for this operation.

In the other hand, any commune could manage autonomy thanks to the sole mobilization of its tax revenues. Other strategies should be developed: decentralized cooperation, territory planning, local economic development, territorial shaping of the public investments, intercommunal agreement and solidarity, social convention…

Then, including SAHA’s support in the promoting of the territory’s economic dynamics guarantees the own revenues’ steadiness at the commune level by strengthening its role and responsibility in the matter (multi-actors facilitation, economic infrastructures providing, public security, call for foreign investments, land conflicts managing…)

The support to the communes’ financial empowerment should be undertaken in a larger view of the governance. Indeed the commune is the basic CTD/DTC. The more competences and resources the ministries departments transfer to the base, the more efficient the communes are in delivering public services and in their strategy to fight poverty.