Contribution of Direct Taxation on Municipality's Expenditure: Special Reference to Kalmunai Municipal Council in Sri Lanka

The taxation is a great economic tool to govern economics for any country. Under the concept of tax, direct taxes are playing an essential role in the revenue collection of local governments of a country. Through this revenue local governments are making expenditure to give public services to the people. In order to that, the objective of the study is that identifying the contribution of direct taxes on the expenditure of Kalmunai Municipal Council. The primary and secondary data was used for the study. The primary data was collected through the Interview, and telephone conversation. The secondary data was collected through the budget, Final year reports and Citizen's Guide book of Kalmunai Municipality within the period from 2001 to 2014. The objective was analyzed through the multiple regression models. The results show that, the assessment tax and the Business tax have positive impact on the expenditure of Municipality while the entertainment tax has the negative impact. And also The Business and Trade tax has more influence in the expenditure of Municipality. Therefore to enhance the contribution of these direct taxes within the time period this study suggests to making awareness about the taxes among the people, use some easier payment methods and active administrative work.