Public revenue occupies an important
place in the study of public finance. The
Government has to perform several functions for the welfare of the people.They involve substantial amount of public expenditure which can be financed only through public revenue. The amount of public revenue to be raised depends on the necessity of public expenditure and the people’s ability to pay.
The income of the government
through all sources is called public income
or public revenue.According to Dalton, the term “Public Income” has two senses — wide
and narrow. In its wider sense it includes all the incomes or receipts which a public authority may secure during any period of time. In its narrow sense, it includes only those sources of income of the public authority which are ordinarily known as
“revenue resources.” To avoid ambiguity,
the former is termed “public receipts” and the latter “public revenue.”In a narrow sense, it includes only those sources of income of the Government which are described as “revenue resources”.In broad sense, it includes loans raised by the Government also.
Classification of Public Revenue:
Public revenue can be classified into
Tax is a compulsory payment by the
citizens to the government to meet the
public expenditure. It is legally imposed by the government on the tax payer and in no case tax payer can refuse to pay taxes to the government.
“A Tax is a compulsory payment made
by a person or a firm to a government
without reference to any benefit the payer
may derive from the government.”
“A Tax is a compulsory contribution
imposed by public authority, irrespective of
the exact amount of service rendered to the
tax payer in return and not imposed as a
penalty for any legal offence.”
Characteristics of Tax:
1. A tax is a compulsory payment made to the government. People on whom a tax is imposed must pay the tax. Refusal to pay the tax is a punishable offence.
2. There is no quid pro quo between a taxpayer and public authorities. This means that the tax payer cannot claim any specific benefit against the payment of a tax.
3. Every tax involves some sacrifice on part of the tax payer.
4. A tax is not levied as a fine or penalty
for breaking law.
Some of the tax revenue sources are
The revenue obtained by the
government from sources other than tax
is called Non-Tax Revenue. The sources of
non-tax revenue are
1. Fees:Fees are another important source
of revenue for the government. A fee is
charged by public authorities for rendering
a service to the citizens. Unlike tax, there
is no compulsion involved in case of fees.The government provides certain services and charges certain fees for them. For example, fees are charged for issuing of passports, driving licenses, etc. 2. Fine:A fine is a penalty imposed on an individual for violation of law. For example, violation of traffic rules, payment of income tax after the stipulated time etc.
3. Earnings from Public Enterprises:The Government also gets revenue by way of surplus from public enterprises.Some of the public sector enterprises do make a good amount of profits. The profits or dividends which the government gets can be utilized for public expenditure.
4. Special assessment of betterment levy:It is a kind of special charge levied on certain members of the community who are beneficiaries of certain government activities or public projects. For example,due to a public park or due to the construction of a road, people in that locality may experience an appreciation in the value of their property or land.
5. Gifts, Grants and Aids:
A grant from one government to
another is an important source of
revenue in the modern days. The
government at the Centre provides
grants to State governments and the
State governments provide grants
to the local government to carry out
Grants from foreign countries are
known as Foreign Aid. Developing
countries receive military aid, food
aid, technological aid, etc. from other
countries. 6. Escheats:It refers to the claim of the state to the property of persons who die without
legal heirs or documented will.
Canons of Taxation:
The characteristics or qualities which
a good tax should possess are described as
canons of taxation. It must be noted that
canons refer to the qualities of an isolated
tax and not to the tax system as a whole.A good tax system should have a proper
combination of all kinds of taxes having
According to Adam Smith, there are
four canons or maxims of taxation. They
are as follows:
1.Canon of Ability:The Government should impose tax in such a way that the people have to pay taxes according to their ability. In such
case a rich person should pay more tax
compared to a middle class person or a poor person.
2.Canon of Certainty:The Government must ensure that there is no uncertainty regarding the rate of tax or the time of payment. If the
Government collects taxes arbitrarily, then
these will adversely affect the efficiency of
the people and their working ability too.
3.Canon of Convenience:The method of tax collection and the timing of the tax payment should suit the convenience of the people. The Government should make convenient
arrangement for all the tax payers to pay
the taxes without difficulty.
4.Canon of Economy:The Government has to spend money for collecting taxes, for example, salaries are given to the persons who
are responsible for collecting taxes. The taxes, where collection costs are more are considered as bad taxes. Hence, according to Smith, the Government should impose only those taxes whose collection costs are very less and cheap .