Government Revenue and its sources

Government Revenue

Government revenue or public revenue refers to the income of the government received from various sources. It is a subject that is related to the study of principles, sources, and processes of receiving income by the government. In recent times, the functions of government have increased due to which adequate revenue should be collected to undertake these functions. Therefore, the government tries to raise a large amount of income to fulfill the expenditure.

The main objective of the study of public revenue is to find out how the government income can be raised from different sources, what will be the effect of rising income on the people, and how the adverse effects can be minimized.

Sources of Government Revenue

A government raises income from different sources. Broadly speaking, the sources of government revenue can be categorized into three groups. They are as follows:

Tax Revenue
Non-Tax Revenue
Foreign Grants

1.Tax Revenue

Taxes are the compulsory payments made by the people to the government and the major sources of public revenue. Various kinds of taxes are imposed on the people, which are described as follows:

1. Customs: The taxes which are imposed on exports and imports at the customs office are called customs. These taxes are imposed on goods according to the quantity and the value of such goods. Customs are the indirect taxes.

2. Tax on consumption and production of goods and services: Government imposes taxes on the production and the consumption of goods and services. In this category, excise duty, sales tax, entertainment tax, contract tax, road and bridge tax, value-added tax, etc. are included. And these taxes are indirect taxes.

3. Land revenue and registration: Land tax is imposed on landlords for the ownership of the land. Registration charges are the payments made for the registration of land and houses. These taxes are direct taxes.

4. Tax on property, profit, and income: Public corporations, private companies, and individuals should pay profit and income taxes according to their income and profit. Taxes on houses of urban areas and vehicle taxes are also imposed on the ownership of such property. These taxes are direct taxes.

2. Non-Tax Revenue

Non-tax revenue includes the following:

1. Gifts and grants: Voluntary payments made by the people for the relief works at the time of natural calamities and disasters are called gifts. Some institutions or persons also make donations to the government.

2. Fees: Government collects fees from different sources such as fees are charged on the services of education, health, and firm registration, license of vehicles and guns, the permission of mountaineering and sales of goods, etc.

3. Fines and penalties: Fines and penalties are charged to those persons who violate the rules and regulations of the country. The objective of a fine and penalty is to prevent crime and undesirable acts. Hence, these sources also raise the income of the government.

4. A property without successor (Escheat): The government claims the property of dead persons whose legal inheritance is not in existence. Similarly, the bank balance is not claimed by anybody, and the property of dissolved organizations is also received by the government. In some cases, the government seizes the property of individuals and raises their income.

5. Special assessment or betterment levy: Government charges special assessment to those people who are directly benefited due to the construction of roads, canals, bridges, etc. It is a charge which is levied for special benefit as a direct return from the public constructions.

6. Income from public properties and enterprises: Government can earn income from public properties like rent on public land, minerals, rivers, forests, etc. Similarly, it receives income by selling goods and services produced by public enterprises. The services rendered to the people by the supply of drinking water, electricity, transport, communication, postal services, etc. raise the income of the government.

3. Foreign Grants

The government of a developing country can receive funds from foreign countries. In recent times, foreign grants consist of a large share in the budget of such countries.