Most local bodies lacked vehicles and sanitation office and rates were also not being collected effectively, the president office said in a statement.
The statement said old circulars that made rate collections difficult would be changed and President Rajapakse had also asked heads of local government bodies to look at sectors where taxes could be charged.
Local government officials had complained that proceeds of stamp duty and fines due from provincial councils were not transferred.
The president had also agreed that the pay of chairmen and deputy chairmen were not enough and they would be raised in the future.
Sri Lanka's administrative structure is made of central government departments coming under and 'devolved subjects' including some hospitals, education services and roads coming under