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PUBLIC REVENUE

Mr. Nithin Kumar S

Assistant Professor (Economics)

Department of Business Management

St. Aloysius College (Autonomous)

Mangalore-575003

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INTRODUCTION Government needs to perform various

functions in the field of political ,social and economic activities to maximize social and economic welfare . In order to perform these duties and functions government require large amount of resources . This resources are called Public Revenues .

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PUBLIC REVENUEThe term Public Revenue can Be used in

two senses

Public Revenue

Narrow sense

It includes only those sources of income of the government which are described as

revenue resources

Wider sense

It includes all the income & receipts of the government irrespective of the

sources

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Public Revenue

Narrow sense - it includes only those sources of income of the government which are described as revenue resources.

These sources are not subject to repayment.

Eg:- tax, fee, fines etc.

Wider sense – it includes all the income and receipts of the government irrespective of their sources.

Eg:- loans raised by the government which is to be repaid.

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Public RevenueIn Aggregate public income or the public

revenue is the income of the government through all the sources.

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CLASSIFICATIONS OF PUBLIC REVENUE

1. Adam Smith’s Classification Revenue From The People Revenue From The State Property

Revenue From The People Includes Tax Revenue. Revenue from The State Includes Revenue From The Public

Enterprises.

2. Bastable’s Classification Revenue Received By the Government through Various State

Functions. Revenue Received By the State By its Own Capacity

Various Functions Include fee and Prices(Administrative Revenue). Revenue Earned By State’s own Capacity includes the revenue

received by imposing tax(Tax Revenue).

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CLASSIFICATIONS OF PUBLIC REVENUE

3. Prof. Adam’s Classification Direct Revenue Derivative Revenue Anticipatory Revenue

Direct Revenue

This category includes all the income which the state derives from public enterprises like Rail, Road, Post & Telegraph etc.

Derivative Revenue

The Income Derived From the Public is Grouped Under This Category.

Example: Taxes, Fees, Fines Penalties etc.

Anticipatory Revenue

It includes income from the sale of bond or other forms of Commercial Revenue.

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CLASSIFICATIONS OF PUBLIC REVENUE4. Seligman’s Classification□ Gratuitous Revenue□ Contractual Revenue□ Compulsory Revenue

Gratuitous Revenue

it is a revenue which is received by the state without any cost.

Example: Gifts Contractual Revenue

it is a revenue received by the state as a result of the sale of commodities and services by the government to the people.

Compulsory Revenue

compulsory revenue are those revenues which are derived by the government in the form of tax, fee, fine etc.

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CLASSIFICATIONS OF PUBLIC REVENUE5. Dalton’s Classification Tax Price

Tax

tax is a compulsory charge imposed by public authority. Price

Prices are paid voluntarily by private persons, who enters into contracts with authorities.

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CLASSIFICATIONS OF PUBLIC REVENUE6. Ideal Classification

Prof. Findlay Shirras Classifies Public Income into Two Categories Tax Revenue Non – Tax Revenue

Tax Revenue

Revenue Earned By the State by imposing tax. Non – Tax Revenue

Revenue earned by the state from other than the tax source.

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CLASSIFICATIONS OF PUBLIC REVENUE7. Taylor’s Classification Gifts and Grants Administrative Revenue Commercial Revenues Taxes

Gifts and Grants

Grant – Financial assistance provided by one government to another.

Example: central Government may provide Grant-in-Aid to State governments to perform some functions.

Administrative Revenue

Revenue received by the state by performing administrative functions.

Example: Fees, Fine, Penalty etc. Commercial Revenue

commercial revenues received by the government in the form of prices paid for government produced goods and services.

Example: Tuition fee paid in Public Education institutions. Taxes

Taxes are the compulsory payments to government without any exceptions. Taylor’s Classifications of public revenue is most logical and scientific and seems to be quite

useful from the practical point of view.

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CLASSIFICATIONS OF PUBLIC REVENUE

8. Prof. J K Mehta’s Classification● Tax● Fee● Duty

Tax

when the object is to obtain money for the finance of services (production of goods included), the levy should be regarded as tax.

Fee

a levy, which has the object of discouraging the consumption of goods and services performed by the state has been called as fee.

Duty

if the object is to discourage the production or the use of commodities produced by private agencies or functions performed by such agencies, the levy has been called as Duty.

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Sources of Public RevenueThe sources by which a government earns its

income are classified into two categories.

a. Tax Revenue

b. Non Tax revenueSources of Public Revenue

Tax RevenueNon Tax revenue

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Tax Revenue

Tax revenue is the income that is gained by governments through taxation.

Taxes are compulsory contribution levied by the state for meeting expenses in the common interests of all citizens.

Tax revenue can be

classified into:

(1) direct taxes and

(2) indirect taxes.

TAX

DIRECT TAX

INDIRECT TAX

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Direct Taxes: A tax is said to be direct, if the tax payer bears the burden of the tax. He cannot shift the burden to any other person. Example – Income tax, wealth tax and gift tax.

Indirect Taxes: Indirect tax is shifted by the payer to others. If sales tax is imposed on sugar, the producer or dealer who pays it passes it on to the next buyer and ultimately the burden is borne by the consumer. Example- Sales tax

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NON – TAX REVENUE SOURCES

Non-Tax Revenue sources of public revenue which are raised by the government from other than tax in the economy.

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ADMINISTRATIVE REVENUES

FeesSpecial AssessmentsFines and PenaltiesForfeituresEscheats

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ADMINISTRATIVE REVENUEFees

Prof. Seligman – “A payment to defray the cost of each recurring service undertaken by the government, primarily in the public interest, but conferring a measurable special advantage on the fee payer” (Essays in Taxation)

• Fees is a payment charged by the government to bear the cost of administrative services rendered in public services.

• Fees is not a voluntary payment it is a compulsory payment.

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ADMINISTRATIVE REVENUESpecial Assessment :-Prof. Seligman – “A compulsory Contribution,

levied in proportion to the special benefit derived to defray the cost of special improvement to property undertaken in the public interest.”

Example - by the construction of roads, schools etc are going to yield some common benefit to the society. Because of this the values or the rent of the property may increase.

So that the government can impose some levy on these special assessments to recover a part of expenses incurred.

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ADMINISTRATIVE REVENUEFines and Penalties

These are not an important source of public revenue.

Fine - punishment imposed for infringement of law.

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ADMINISTRATIVE REVENUEForfeitures

It refers to the penalty imposed by courts for the failure of individuals to appear in the court.

Forfeitures are also not important source of public revenue.

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ADMINISTRATIVE REVENUEEscheats

Escheats are the claims of the government to the property of a person who dies without having any legal heirs or without keeping a will.

In such situations all the property of the person including bank balance and other properties pass to the government.

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THANK YOU