Outsourcing revenue collection to private agents: Experiences from local authorities in Tanzania

Abstract

This paper examines recent experiences with outsourced revenue collection to private agents in local government authorities in Tanzania. Based on evidence from four urban and three rural councils, the study examines how systems of privatised tax collection perform with respect to revenue generation, administration, and accountability. The selected councils are Dar es Salaam and Mwanza City Councils, Ilala and Kinondoni Municipal Councils, and Kilosa, Kisarawe and Moshi district councils. The study concludes that outsourcing offers no ‘quick-fix' neither to increasing local government revenues nor to reducing tax administrative problems. While collection has increased and become more predictable in some councils which have outsourced revenue collection, others have experienced substantial problems with corruption and exceptionally high profit margins for the private agents at the expense of accomplishing a reasonable return to the respective local government authorities. However, when appropriately managed and monitored, outsourced revenue collection may establish a foundation for more effective and efficient local government revenue administration.