Abstract:
This study attempted to assess the factors associated with bad debts in local governments’ revenue
collections. The government institutions, departments and agencies defines revenue as amount of
money collected from people, mostly the source of the revenue being taxes on its investments,
properties and business that are credited over a certain period of time. This definition varies with
public sector perceptions for which in the private entities revenue is considered as money received
from sales of goods or services. For the attainment of the study objectives, the number of sample
size employed during the study was 30 to ensure authenticity of the data. Respondents were
selected through purposive sampling in Arumeru district for which 15 of the workers were from
Tanzania Revenue Authority and 15 staffs from the Arumeru district office. Further, participants
were divided into subgroups based on their common characteristics called strata. The study found
local governments experience difficulties in timely revenue thus led to an increment in bad debts. It
is with these factors the financial hardship kept continue to be realized in local government
authorities. To revert the situation, the council came up with an outsourcing some of its sources of
revenue as a way of minimizing the effects of these factors on council’s revenue. Though debt
collection is not a strong determinant of revenue collection it is important that the authority uses
effective tools to manage debt to reduce debt portfolio. Hence, Authority should modernize the debt
management function by employing debt management systems and move from manual system. To
deter non-compliance the authority should improve on debt collection. This will change the attitude
the taxpayers maybe having concerning effectiveness of the authority in collection tax in that if the
taxpayers do not believe that the government will collect overdue taxes, they may be less motivated
to pay. This will hence have a negative effect on revenue base over time.
