Sources of Government Revenue: 9 Sources | Economics (2024)
The following points highlight the nine main sources of government revenue. The sources are: 1. Tax 2. Rates 3. Fees 4. Licence Fee 5. Surplus of the public sector units 6. Fine and penalties 7. Gifts and grants 8. Printing of paper money 9. Borrowings.
Source # 1. Tax:
A tax is a compulsory levy imposed by a public authority against which tax payers cannot claim anything. It is not imposed as a penalty for only legal offence. The essence of a tax, as distinguished from other charges by the government, is the absence of a direct quid pro quo (i.e., exchange of favour) between the tax payer and the public authority.
Tax has three important features:
(i) It is a compulsory contribution, to the state from the citizen. Anyone refusing to pay tax is punished under law. Nobody can object to taxation on the ground that he is not getting the benefit of certain state services,
(ii) It is the personal obligation of the individual to pay taxes under all circ*mstances,
(iii) There is no direct relationship between benefit and tax payment.
Source # 2. Rates:
Rates refer to local taxation, i.e., taxation levied by (or for) local rather than central government. Normally rates are proportional to the estimated rentable value of business and domestic properties. Rates are often criticised as being unrelated to income.
Source # 3. Fees:
Fee is a payment to defray the cost of each recurring service undertaken by the government, primarily in the public interest.
A licence fee is paid in those instances in which the government authority is invoked simply to confer a permission or a privilege.
Source # 5. Surplus of the public sector units:
The government acts like a business- person and the public acts like its customers. The government may either sell goods or render services like train, city bus, electricity, transport, posts and telegraphs, water supply, etc. The government also earns revenue from the production of commodities like steel, oil, life-saving drugs, etc.
Source # 6. Fine and penalties:
They are the charges imposed on persons as a punishment for contravention of a law. The main purpose of these is not to raise revenue from the public but to force them to follow law and order of the country.
Source # 7. Gifts and grants:
Gifts are voluntary contribution from private individuals or non-government donors to the government fund for specific purposes such as relief fund, defence fund during war or an emergency. However, this source provides a small portion of government revenue.
Source # 8. Printing of paper money:
ADVERTIsem*nTS:
It is another source of revenue of the government. It is a method of creating extra resources. This method is normally avoided because if once this method of financing is started, it becomes difficult to stop it.
Source # 9. Borrowings:
Borrowings from the public is another source of government revenue. It includes loans from the public in the form of deposits, bonds, etc. and also from the foreign agencies and organisations.
In the United States, individual income taxes (federal, state, and local) were the primary source of tax revenue in 2022, at 45.3 percent of total tax revenue.
The primary sources of revenue for the U.S. government are individual and corporate taxes, and taxes that are dedicated to funding Social Security and Medicare.
The largest sources of revenue for local governments include intergovernmental revenue, property taxes, utility revenues, sales taxes, and other sources of income.
Tax structures for the OECD, LAC, Asia-Pacific (29) and Africa (33) averages and for selected economies in 2021 Economies in Africa, Latin America and the Caribbean, and Asia and the Pacific rely more on revenues from taxes on goods and services and corporate income taxes, whereas OECD countries rely more on revenue ...
The top 10 percent of income earners pay more than 60 percent of all federal taxes and 76 percent of income taxes, shares that have been increasing over time. The US Treasury's Office of Tax Analysis estimates average federal tax rates, accounting for income, payroll, corporate, and other taxes.
Federal Budget. What are the sources of revenue for the federal government? Over half of federal revenue comes from individual income taxes, 9 percent from corporate income taxes, and another 30 percent from payroll taxes that fund social insurance programs (figure 1). The rest comes from a mix of sources.
Revenue for local governments comes from several sources: income taxes, property taxes, sales taxes, intergovernmental transfers and grants, fees for government services, fines imposed by local ordinances for violations, and the sale of goods and services like public utilities, hospital fees, and community college ...
Taxes provided 52 percent of state and local general revenues in 2021, including: 15 percent from property taxes. 13 percent from individual income taxes.
Just like state governments, local governments also collect taxes. Taxes that make the most revenue are property taxes, sales taxes, income taxes, and, lastly, licensing fees.
Taxes, rates, fines, user charges and licenses are the most dependable internal sources of revenue to the local governments. This is because of the certainty of the amount to derive at a particular time.
Personal income taxes and Social Security taxes are the largest sources of federal government revenues. The federal government derives roughly 75 percent of its revenue from these two sources. Corporate income tax comprises about 14 percent of federal government revenue with the remainder coming from all other sources.
Personal income tax was the largest contributor (35,5%), followed by value-added tax (25,0%), CIT (20,7%) and other levies and taxes (18,8%). As SARS points out, although CIT has retained its position as the third largest source of tax revenue, its contribution has weakened over the years.
Income and sales taxes make up the majority of combined state tax revenue, while property taxes are the largest source of tax revenue for local governments, including school districts.
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