An Assessment of Local government capacity for mobilizing revenue: A case study on Nepal

Abstract

Local governments cannot function effectively without adequate revenue generation. In newly federated Nepal, fiscal devolution involves generation of local taxes, charges and fees and external grant transfers from upper level governments. This paper assesses the capacity of the local governments to mobilize local resources for development and the delivery of local services. Two District Development Committees (DDCs) of Nepal were selected as cases based on Minimum Condition and Performance Measurement (MCPM), a criterionbased evaluation made by the Government of Nepal to rate local government effectiveness. The mixed method of sequential strategy was adopted for this study. The study finds that institutional capacity determines local resource mobilization, which in turn depends on the higherlevel tax base, efforts, effective compliance of devolved fiscal powers, and the greater extent of people’s engagement.