The efficient financing of local government bodies, of which Pourashava is an important part, has become a major challenge for Bangladesh. The density of municipal population is rising due in- migration and higher Population growth rate. The Pourashavas are responsible for providing infrastructure and services irrespective of social and economic background of the residents. The poor residing in municipal areas constitute about one third of total population and their tax payment capacities are very limited. The middle and upper class households pay most of the taxes. Also, by definition, property owners only pay Holding tax. Greater tax collection will eventually depend on the capability to pay. However, it is true that more than half of the gross domestic product comes from urban areas and thus it is assumed that tax payment capability is there within the Pourashava population. These people are expected to pay taxes if they receive better urban facilities. Over past years, total revenue of Pourashavas are increasing though the rate of increase is not in line with the demand for services. The demands for services are not being met adequately and increased doses of government and donor funding have been made available throughout the last decade. It is a matter of concern that the Pourashavas are not mobilizing potential revenue and not managing expenditure in a thorough and systematic manner. At this backdrop, Tangail Pourashava has taken a very timely decision to enhance its revenue base and strengthen its financial management system. Analysis of Tangail and five other Pourashavas reveals that the Pourahavas are not collecting taxes efficiently. Performance of collection of Holding tax is very low. Tangail Pourashava collected only 26.26% of its total demand for taxes in 1997-98. It had a total arrears tax demands of Tk. 29.57 million in that year. Per capita collection was only Tk. 51. The total internal revenue of Tangail was Tk. 28.40 million in the same year. This means that by ensuring collection of arrears taxes, The Pourashava can increase its revenue by a significant extent. By increasing tax rates and improving collection efficiency, the potential for enhanced revenue is also there in case of trade licenses, vehicle tax, entertainment tax and market fees. There is also scope for increased income from own property. A significant portion of the own revenue is spent on salaries, recurring expenses and minor development works. Major capital projects are funded by government grant. Grant constituted 49.27% of total Pourashava revenue in 1997-98. Of total expenditures, salaries and allowances accounted for 12.57%, office maintenance 8.22%, services 14.72%, and development and maintenance 64.49%. The report recommends measures for improvement in two broad areas. These are, (i) Increasing revenue and reducing expenditure, and (ii) Financial management.