Baton Bleu Restructures its tax system in order to curb its budget shortfall and provide better infrastructure to the city. Will this new system assist in solving the problem?
BATON BLEU CITY Oct 22. 2014 The council’s president, L. F. “Tubby” Lateffe, today announced the new recommendations to be used in the collection of more revenue. The president started by saying, “In order to have a continuous and smooth cash flow to fund the developments of the city and maintain it as other cities in the world, collection of fees and taxes is compulsory.
Therefore, the following recommendations provided in this report will help solve the projected shortfall in the budget for the fiscal years 2015-16 and the 2016-17.” He said that the recommendations will give the authority and the city council better methods to collect more revenues and fees. They will help curb the developmental crisis that has hit the city over the past financial years. The major developments that affect almost everyone in the city includes the increasing demands for reduction in traffic congestion and better infrastructure. “The developmental plans stated here will assist the city council executives to undertake their obligations in meeting the looming and daily stakeholder’s demands. The diversion and changes in the revenue collection actions stated have into consideration its effects to the city government and the general public.” The president added.
The well-being and the state of the future generation of the city of Baton Bleu rely on the actions and the set rules undertaken now. He said that the city must a well-organized and more revenue-generating the arena in order to have better developments and put the city in a good condition for both the insiders and the visitors. (Musgrave, 19). These stakeholders stated by the president include; councilmen, businessmen, current and potential estate owners, citizens, lobbyists and much more.
In a statement, the president admitted that the government has a lot of responsibilities in making sure that it generates a sufficient amount of revenue in order undertake the developmental issues in the city. These developmental issues include solving the itching issues of traffic congestions and the sewerage services that is also a very crucial issue in the human being’s daily activities. “The government of Baton Bleu takes into consideration of these activities to the economic, social and political arenas.
Consideration of all the issues including certainty, sufficiency elasticity, progressivity and other issues connecting national government and local government upon developing the revenue collection plans is crucial (Morrell, 23).” Nodded the president.
The issue with taxation arises when the interests of the affected stakeholder are not considered during the system formation.
These issues include: will the ordinary citizen afford the increased prices of goods and services produced under increased tax system? Will the tax system attract investors?. One of the major and implementable method of revenue collection is the taxation method (Musgrave, 65). Before imposing the tax to the stakeholders, consideration will be made on the following crucial aspects.
First, the council will be in a position to vary the rates between sectors without affecting the aspects of trade that is a major means of survival for residents and the investors. These investors include both local and external ones. Second the areas of origins will be communicated and deeply explained to the citizens. The aim of these explanations is persuading the affected stakeholders not to reject the system. Some areas where no tax imposed which are basic expenditure for everyone such as commodities for in household consumptions. Upon imposing taxes on these expenditures, variables would yield extra $ 10000000 annually for the government and the city at large. The results of the revenue outcome are responsive to the minor administrative costs that will result to unchallengeable and statistically, $ 2000000 annually for the first three years and $500000 afterwards. Finally, the variation in the tax rate will automatically accommodate the obvious expansion which will arise from the pressure in taxation like the demand to increase the city spending which will result to huge inflation. Therefore, The president sympathised with the ordinary citizens and consumers and stated that there will be no any additional taxes on sales.
“Every citizen has the right to access to goods and services in these city without no extra cost. Therefore, the 4% sales tax will remain effective” added Lateffe.
Individual property tax will be an increased, but a slight will be made on the industrial property There will be a 3% and 2% increase on the private and industrial property taxes respectively. With this increase, the city exchequer will receive more than 12.5 million which is 5% of the overall budget. Roads leading to their estates and properties will improve through the collected funds, sewerage systems in these properties will be much better. Therefore, no compromise on the state of property tax system introduced. The tax collection plan is from the taxpayers through their bank statements and the revenue authority act which has the record of the net worth of every property in the city. Since the big fish individuals are the ones who own massive properties in the city. These actions will create better political and social arena. As a result of the increase in the property tax, there are projections of the increase in the gross domestic revenue by 2-3% annually that will increase in future years upon ownership of more properties. As a result of the inflation rates and the improved livelihoods and the state of the city, the city council is expected to review these rates upwards in order to have more revenues in the future.
Though there are some drawbacks that accompany it, the user system is a better method to collect revenues by the city council.
Here, the direct beneficiaries in the sector will pay the costs associated with the developments in that area. Road users are required to pay toll fees in the roads and fuel consumption levy and much more. These actions though not directly increasing the revenue for the government, and there are some indirect significant benefits accrued. This tax system will offer equity in the collection of taxes and certainty on how who, how much and where collected is clear. With these increased revenues and multiple collection criteria in different sectors, the projections like ample parking systems, improved welfare in the roads sewerage systems and much more will be achieved, and the shape of the city changed.
The process of the benefits principle in the collection of taxes includes first identifying the city's sewerage lines and roads. These are the roads and the sewerage lines that needs expansion or new ones constructed in order to have access to those facilities and to identify potential and current beneficiaries of the same. Using simple calculations, with the municipal taking 12 million 20 years bond with 3.5% interest annually there will be a huge amount of debt expected. This plan is expected to have a minimum of $800000 or more depending on the seasons and the activities by the road users. In the next ten years tenure, the cost of constructing such a system is expected consume more than $8 million. However by using the benefits principle in servicing the loan, it will be much easier for the government and the project will be complete in time. The president quoted an example of from Warringah City Council in North West Australia where it raised 6.5% in revenue from fuel levy and toll fees.
The organized roads will create more arena for estate developments, car parking and pavements that the government will use as a means to raise more revenues. These revenues come from the parking fees, sewerage services fees and much more. The problem with these method of revenue collection in the massive computation and projections of the development costs. Some of the projections may be low or high which gives overstated or understated figures.
President Lateffe said that in order to get along well with environmental protection agency (EPA) on the replacement and the expansion of the drainage systems, there is a need to deal with the severe penalties that may follow. The internal pressure is from the residents and citizens of the Baton Bleu city where they need to have better drainage systems. The external pressure is from the national environmental body that has its stated timeframes that it gives the municipal governments to do the same (Musgrave, 34). He gave the way ahead for regional shared provision and the public-private partnership in the provision for this crucial service.
Public-private-partnerships (PPPs) system of drainage service provision is good for the council since it can choose to be exclusive of the service provision and save the funds to undertake other activities. In order to have better service provision on this issue, the county administration will use joint service provision since it is economical and saves fund. The joint will be with the large corporations in the city who will enjoy other services like the production costs reduced and other neighboring towns. The disadvantages of the project are the cost associated with the dialogues on the way forward and the compensating benefits to the corporations.
(PPPs) Is a better method of controlling, expanding and achieving better sewerage control system in Baton Bleu city. There is a contract basis agreement that will specify each party's roles and objectives in the project. However, the core areas in a responsibility of the city council. These arrangements will assist in meeting the deadlines provided by the EAP and overcome the pressure from the residents. Some cities like Wollongong implemented the PPP system of service provision to the public and was a success. Baton Bleu will also leap the same benefits from the project.
Question Three: bonus
In restoring the rainfall fund before the anticipated downfall of the revenues, recommendations made above will work well. Even though some of the plans may not yield a lot of revenues, the little from one sector and the little from the other sectors will comprise the total budget to cater for all expenses. The advantage of the implemented multiple based tax system will ensure that no individuals from a particular sector will be overburdened by taxes as it will be spread ta all stakeholders. On the other hand, there is no one who will evade from the tax system of the government.