Rwanda’s decentralisation policy has progressively transferred important responsibilities for planning, service delivery and local development to districts. Yet one important area remains less decentralised: the collection of revenues legally assigned to local governments.
Districts are expected to prepare budgets, implement development programmes, provide services and account to citizens. However, many local taxes and fees are still collected by the Rwanda Revenue Authority (RRA) on their behalf.
This raises an important question: should districts not have greater control over the revenues that directly finance their responsibilities?
The decision to assign RRA the role of collecting local government taxes and fees was understandable when the arrangement was introduced. At the time, many districts were still developing the institutional, human-resource, financial-management and technological capacity needed to administer local revenues effectively.
RRA brought stronger tax-administration systems, technical expertise and established controls. But more than a decade later, the operating environment has changed significantly.
Districts today have dedicated staff responsible for revenue mobilisation and financial management. Their administrative structures extend from district to sector and cell levels, placing them close to businesses, properties, markets and other economic activities that generate local revenue.
Technology has also improved. The Local Government Taxes Management System (LGTMS) provides a digital platform for taxpayer registration, declaration, payment, accounting and other aspects of local revenue administration.
The question, therefore, is whether the original reasons for centralising local revenue collection remain as compelling as they once were.
Greater district control over revenue collection could strengthen local ownership and accountability. District authorities understand their local economies and are often better positioned to identify potential taxpayers, monitor emerging businesses, follow up on arrears and identify untapped sources of revenue.
Direct responsibility could also create stronger incentives for districts to expand their own-source revenue base. When local authorities are accountable for both raising revenue and spending it, the connection between taxation, service delivery and citizen expectations becomes clearer.
This does not mean RRA should be removed from the local revenue system. Its role could gradually evolve.
Rather than directly collecting all local revenues, RRA could focus more on oversight, standard-setting, technical guidance, capacity building, compliance support, data management and enforcement assistance where necessary.
Such an arrangement would preserve the strengths of Rwanda’s national tax administration while giving districts greater responsibility for their own financial sustainability.
Of course, any transition should be gradual and carefully managed. Not all districts may have the same level of capacity, and safeguards would still be needed to ensure accountability, consistency and effective revenue administration.
Where capacity gaps remain, they should be clearly identified and addressed through targeted training, systems strengthening and technical support.
Fiscal decentralisation should ultimately reflect the broader logic of decentralisation itself. If districts are trusted to plan development, manage budgets and deliver public services, they should progressively be given greater authority over the revenues assigned to them.
Rwanda has already built much of the institutional and technological foundation required for this next step.
The unfinished task is to better align responsibility with authority.
Giving districts greater control over their own revenues would not only strengthen fiscal decentralisation. It could also encourage stronger local revenue mobilisation, deepen accountability and give districts greater fiscal space to respond to the development priorities of the communities they serve.
The writer is a Governance and Decentralisation Expert.