Development of 13 Mozambican
Municipalities in Central and Northern Mozambique : Summary report

The objective of this study on the
Development of 13 Mozambican Municipalities in Central and
Northern Mozambique is to assess the impact that the 2008
reforms on own-source revenues is having on the municipal
revenue potential. To do so, it calculates the revenue
potential of four fiscal and three non-fiscal revenue
sources. The analysis shows that there is substantial
untapped revenue potential at the municipal level, with
estimates indicating that -in the case of the most buoyant
local revenue sources- municipalities are only collecting
about half of the revenue potential. In the worst cases,
municipalities are collecting far less than 10 percent of
the total revenue potential of a local revenue source. The
fact that a revenue gaps exists is not only an indication of
weak municipal performance. Municipalities have relatively
recently been created and it takes time, capacity, and
effort, to consolidate their revenue functions. Tax
administration is overall still weak and a series of vacuums
exist on the municipal fiscal legislation. The analysis
reveals that the current revenue instruments at the disposal
of municipalities are generally appropriate municipal
revenue instruments, so that efforts at the national and
municipal levels should be made to build the capacity of the
local tax administration to collect these revenues. The
report provides specific suggestions on ways to strengthen
the revenue collection for the main municipal revenue
instruments. However, in addition to increasing municipal
tax effort, the expenditure needs of municipalities are so
demanding that additional intergovernmental transfers and
tax sharing arrangements should also be considered as a
building block of municipal finances in Mozambique. The
results of this study aim to become part of the ongoing
dialogue with the municipalities and national tax
authorities to expand the understanding of municipal
revenues in Mozambique on the basis of more sound empirical
evidence. The scope of this analysis was limited to a sample
of six municipalities. In-depth case studies were prepared
for each of these municipalities, upon which the current
Summary Report is based. The six case municipalities
include: Beira, Cuamba, Marromeu, Nacala, Ribaue, and
Vilankulo. To bring the Summary Report and the six municipal
cases together in the most effective way, the current report
follows the same structure as each of the municipal cases.
The diagnosis of the current situation is presented in
Section 2, followed by a discussion on the estimation of
municipal revenue potential in Section 3. Proposals and
recommendations regarding the strengthening of municipal
revenue collection are presented in Section 4.