Budget proposes to consider income in council payouts
"Our intention is to encourage [councils] to generate revenue first. Don't just rely on block grants," he said.
By
Ahmed Mizyal
The budget for 2024 has proposed to determine block grant to councils or funds from the government's revenue shared with island councils based on the revenue earned by the councils themselves.
The Finance Ministry on Tuesday presented a budget of MVR 49.5 billion for next year.
The budget proposes to add consideration of revenue mobilisation or revenue generated by councils as an additional criterion to the formula in order to further strengthen the fiscal formula that the state considers in allocating block grants to councils.
The Decentralization Act also stipulates that the revenue received by councils should be taken into account in the formula.
Criteria for block grant with change in formula will take into account:
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Population living in the island
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The size of the land
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Distance from the county seat
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Distance from the capital city
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Council Performance Index
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Financial Performance Index
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Revenue Mobilization
The revenue mobilization measure will be based on the proportion of total block grants allocated to councils in 2022 and the amount of non-block grant revenue recorded in the 'Business' module of councils in that year.
According to the budget:
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As the proportion of block grant increases council revenue, the amount received by the council from the formula will increase initially
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As income increases, the amount of money received from the formula (in the form of block grants) will also decrease as the council receives more income than a certain amount
Finance Ministry Chief Financial Budget Executive Ahmed Saruvash Adam told reporters on Tuesday that although a criterion for block grants is added, it does not mean that councils are deducted in income.
"Our intention is to encourage [councils] to generate revenue first. Don't just rely on block grants," he said.
"For those who do that work, we have to increase the revenue till it reaches the first block grant amount. When the block is above the grant, it means that we have to reduce our dependence on block grants."
Councils have been given block grants from the state budget from 2020.
