Strategy for Increasing Own Source Revenue of District Governments

Strategy for Increasing Own Source Revenue of District Governments


In Pakistan, the local governments are responsible for providing essential services to their constituents, including health, education, sanitation, and water supply. However, the local governments in Pakistan are heavily dependent on transfers from the federal and provincial governments, which limits their ability to provide these services. One of the ways to enhance the local governments' capacity to deliver services is to increase their own source revenue (OSR). This paper explores the strategies the district governments in Pakistan can adopt to increase their OSR.


In Pakistan, the district governments' primary source of revenue is the local taxes and fees, which include property tax, entertainment tax, conservancy fee, tolls, parking fee, market fee, etc. However, the district governments' revenue from these taxes is insignificant, and they rely heavily on the provincial government transfers. This heavy reliance on transfers creates a serious problem for the local governments as they have little control over the funds they receive, and their budgetary flexibility is limited.

Strategy 1: Improve Tax Administration:

One of the most important ways for district governments to increase their OSR is to improve their tax administration. Currently, the tax administration in most districts in Pakistan is weak, and there is a lack of trained personnel to manage the tax collection process. Therefore, the district governments must recruit qualified staff to manage the tax collection process and provide them with the necessary training and resources.

Strategy 2: Broaden the Tax Base:

Another way to increase the OSR is to broaden the tax base. Currently, the tax base in most districts is narrow, and only a few sectors, such as property, are taxed. Therefore, the district governments should explore other sectors that can be taxed, such as the entertainment industry, professional services, and retail sales. The district governments should also consider introducing a new tax, such as a local sales tax or a service tax, to increase their revenue.

Strategy 3: Encourage Voluntary Compliance:

Another way to increase the OSR is to encourage voluntary compliance among taxpayers. Currently, many taxpayers in Pakistan do not pay their taxes, either because they are not aware of their tax obligations or because they believe that the tax system is corrupt. Therefore, the district governments should launch a public awareness campaign to educate taxpayers about their tax obligations and the benefits of paying taxes. They should also provide incentives to taxpayers who pay their taxes on time, such as discounts or exemptions.

Strategy 4: Improve Financial Management:

To increase the OSR, the district governments should also improve their financial management. This includes improving their budget preparation and execution processes, as well as their financial reporting systems. The district governments should also consider introducing performance-based budgeting, which links the budget allocation to achieving specific goals and targets. 

Strategy 5: Fee for Basic Services

One major issue hindering the revenue generation capacity of district governments in Pakistan is their failure to collect fees for basic services such as water supply, drainage, and sanitation. Many districts either charge very minor fees or do not collect any fees at all, which results in significant revenue losses. This is a critical issue that needs to be addressed, as these basic services are essential for the health and well-being of citizens and require significant resources for maintenance and operation. By implementing effective fee collection mechanisms and ensuring proper maintenance and operation of these services, district governments can generate significant revenue streams that can be utilized for further development initiatives.

Strategy 6: Utilization of Lands

Unutilized lands can be a potential source of revenue for district governments. The district governments can conduct a survey to identify such lands that are not being used for any purpose. Once these lands are identified, they can be leased out to individuals or companies for agriculture or commercial purposes, depending on the nature of the land.

In the case of agriculture, the district governments can lease out these lands to local farmers who can use them to grow crops or raise livestock.

Similarly, commercial lands can be leased out to companies willing to invest in the district. This will not only generate revenue for the district government, but it will also create job opportunities for the local population. The district governments can also encourage local entrepreneurs to start their own businesses on these lands by providing them with the necessary infrastructure and support.

However, it is important to ensure that the leasing process is transparent and fair. The district governments should have a clear policy for leasing out these lands, and the process should be open to public scrutiny. The revenue generated from leasing out these lands should be used for the development of the district and the welfare of its residents. 

Strategy 7: Legal Compliance

The local government laws in Pakistan have schedules of fees and fines for various services, but unfortunately, these are seldom collected by the local governments. This not only results in lost revenue but also negatively affects the overall civic outlook of the cities.

To address this issue, it is important for the district governments to conduct a comprehensive review of the existing schedules of fees and fines and ensure that they are in line with the current market rates and costs. The district governments should also establish a robust system for collecting these fees and fines, including appropriate penalties for defaulters.

The revenue generated from these fees and fines can be utilized to develop various civic amenities such as parks, community centers, and public libraries, which will not only enhance the overall ambiance of the cities but also improve the quality of life of the citizens.

Furthermore, the district governments should also focus on improving the overall efficiency and transparency of their revenue collection systems. This can be achieved by introducing online payment systems, simplifying the payment process, and ensuring the collected revenue is properly recorded and audited.

Strategy 8: Foster Public-Private Partnerships:

Finally, district governments should foster public-private partnerships (PPPs) to increase their OSR. PPPs can help district governments to tap into private sector resources and expertise to develop revenue-generating projects. For example, the district governments can partner with private companies to develop infrastructure projects, such as roads and bridges, which can generate revenue through tolls or user fees.


In conclusion, increasing the district governments' own source revenue is critical to enhancing their capacity to deliver services to their constituents. The district governments can adopt various strategies to increase their OSR, including improving tax administration, broadening the tax base, encouraging voluntary compliance, improving financial management, and fostering PPPs. However, these strategies require a strong political will, effective leadership, and sound management practices to be successful. The district governments in Pakistan must be willing to take bold steps to increase their OSR if they want to provide better services to their constituents.

Amer Ejaz

(Photos taken in District Badin, March 2023)