Local government PPP landscape

All local governments have the power to levy taxes and rates. There are no aggregate figures available, but the main sources of local government revenue are as follows:

• income from taxes, rates, tolls, fees, and other charges;
• rents and profits from property;
• grants made by the national government through annual development plan and special allocations;
• profits from investments; and
• donations and transfers of private or public funds.

According to the Local Government (City Corporation) Act, 2009, there are 26 types of revenue sources for city corporations. For example, the funding sources of the Dhaka North City Corporation are internal revenue collection, central government grants, development grants, project development loans, and other loans.4

• Internal revenue collection

  The power to levy and collect revenues is contained in the Dhaka City Corporation Ordinance, 1983. The revenues are in the form of taxes, rates, and fees whose amounts are established in their respective model tax schedules.

• Taxes and rates (collectively known as the holding tax)

  This levy is applicable to all properties (domestic, commercial, industrial, and institutional). It is a major source of municipal revenue and is composed of

  • Land and buildings assessment (property tax with a ceiling of 7% on the balance of the annual rental value);
  • Lighting rate (street lighting, rate set at maximum of 3%); and
  • Conservancy rate (a rate for provision of solid waste collection and disposal services, also with a ceiling of 7%).
• Service elements of holding tax

  These are charged for all properties in areas where each service is provided, irrespective of whether the individual property owner avails of the service. The service elements include the following:

  • Fixed property transfer tax (levied by the central government, 2% of the declared property value is remitted to the city corporation);
  • Octroi compensation grant (grant from the central government to compensate municipalities for the abolition in 1985 of their powers to levy import and export taxes transmitting their territories);
  • Trades and profession license tax (an annual fixed amount paid by tradespeople and professionals as a license fee to conduct their business activities);
  • Entertainment tax (10%–15% of the entrance ticket value for cinemas, theaters, and exhibitions);
  • Rickshaw license (annual fee);
  • Income from residential, market, and other properties (from advance payments and annual rentals paid by lessees for a property developed by the municipalities);
  • Road excavation fees (charged for utilities that lay pipes and cables under roads); and
  • Others (those that generate minimal revenues).
• Development grants

  These are equity contributions from the central government toward capital project implementation costs. Typically, these are made for the funding of no-cost or indirect cost recovery programs such as roads, flood protection, and drainage, whether from internally generated central government revenues or from external loan or grant proceeds.

• Project development loans

  For cost-recovery projects, such as land development, sanitation, and solid waste management, the central government extends external loan proceeds under subsidiary loan agreements.

• Other loans

  The Dhaka North City Corporation has access to domestic long-term loans from government-owned banks.

• 4Dhaka North City Corporation. Funding Sources. http://www.dncc.gov.bd/site/page/52fff120-67c2-4f99-bf65-4bf9a4e6d4ff/Funding-Sources (accessed 27 August 2020).