Public Finance Capacity Building, Resource Allocation and Public Expenditure Support

The first assignment (2003/03) aimed at developing keys for resource allocation and capacity building in public finance. The background was that during SARDP II a significant decentralization process of delegating political and economic control form both the nation government as well as from individual regions to their districts was initiated. The districts (woredas) were given increase decision rights over planning and resources allocation with the aim of getting a better understanding of the potential for tax revenue at level.

The second assignment (2004/05) aimed at evaluating the current Amhara tax structure as well as offering suggesting future reforms. Among the critical aspects of the decentralization is a solid understanding of the current fiscal revenue infrastructure and an estimate of the regions revenue potential for future fiscal policy formulation. For several reasons, regional tax collection rates are low in Ethiopia; collected amounts equeals to about twenty percent of a typical woreda operating budget. In addition, it appears that tax collection rates are lower in Amhara region than other comparable regions in Ethiopia. Most notably, experts cite a lack of significant incentives for local tax collection. However, no comprehensive study of tax revenue, tax collection and revenue potential had been performed at the regional level. This study initiated the process of assessing the current revenue status of ANRS as well as the potential revenues of the region. Identifying both potential revenues, as well as the methods for collecting these much-needed resources, are critical for Amhara’s future economic development and for local woreda autonomy.