The Nexus Between Internally Generated Revenue and Physical Development Projects: A case of the Wassa Amenfi West Municipality, Ghana

Abstract

This study examines the relationship between internally generated revenue (IGR) and physical infrastructure development in a Ghanaian local government district, the Wassa Amenfi West Municipality. Using a mixed method research design, the study combined quantitative and qualitative data to assess how local revenue mobilization supports development at the district level. A total of 96 respondents, comprising taxpayers, revenue collectors, and municipal official, were selected using the Yamane (1973) formula, ensuring representation of key stakeholder groups. Descriptive statistics, correlation analysis, and binary logistic regression were applied to determine the relationship between IGR and physical development, and to identify factors influencing taxpayers’ willingness to pay. The results revealed a positive and statistically significant relationship (r = 0.488, p < 0.05) between IGR and physical infrastructure, indicating that increases in internally generated funds contribute to improvements in local development projects. However, a large portion of IGR was expended on recurrent costs, limiting funds available for capital investment. The binary logistic regression showed that gender significantly influenced willingness to pay taxes (p = 0.001), with female taxpayers more likely to comply than males. Other factors—education, income, and marital status—were positive but statistically insignificant. The study concludes that while IGF remains an essential tool for local development financing, its effectiveness is undermined by structural inefficiencies in expenditure management and limited taxpayer engagement. It recommends diversifying revenue sources, enhancing fiscal management efficiency, and implementing gender sensitive and participatory tax education programs to strengthen local fiscal autonomy and improve sustainable infrastructure delivery.