‘Public revenue’ (or Government revenue) is concerned with the Income of the Government through various sources. The Government collects/earns money through various forms of tax and non-tax revenue, and use this money to meet its administrative and other expenditures. Tax revenue are the ones which are derived by the process of direct and indirect taxation, whereas non-tax revenue are the ones which are derived from various kinds of public undertakings and other forms of miscellaneous receipts.
CLASSIFICATION OF PUBLIC REVENUE
Tax refers to general compulsory contribution of the wealth if a person. It is levied upon natural and corporate person. The main reason behind tax collection is to meet the expense which is incurred in conferring common benefits to the public. The residents of the state are the ones who pay the tax. There is no direct quid pro quo concept in tax. It does not give direct benefit to the one who pays tax.
On the basis of imposition of burden, the tax revenues are classified into direct and indirect taxes:
The tax which is paid directly by the person on whom it is imposed is a direct Tax. In this case the burden does not shift to the other, i.e the person bearing the tax and the person paying the tax are the same. There is a direct connection between the tax payer and the tax levying authorities.
Direct Tax includes: Income Tax, Wealth Tax, Corporate tax, Gift Tax, Estate Duty. Etc.
INDIRECT TAX (also known as COMMODITY TAX):
The tax which is not paid directly by the person on whom it is imposed is an indirect Tax. In this case the burden partly or wholly shifts to the other, i.e the person bearing the tax and the person paying the tax are not the same. There is no direct connection between the tax payer and the tax levying authorities.
Indirect Tax includes: Customs Duty, Excise Duty, Sales Tax, Service Tax, VAT, etc.
On the basis of income, the tax revenues are classified into Proportional, Progressive, Regressive and Digressive.
When rate of tax remains the same for all, irrespective of the size of income, then it is called Proportional Tax. For example, if the tax levied is 1% of the total income, then the person earning Rs. 1000/- a year will pay a tax of Rs. 10/- a year as tax, and a person earning Rs. 1,00,00,000/- a year will pay Rs. 1,00,000 a year. Hence in proportional tax, with the increase in size of the income the tax amount also increases.
In this type of tax, the rate of tax increases with the increase in income, i.e., higher the rate of income, higher the tax rate. In such type of taxation, the rich pay more tax than the poor, i.e the burden of tax falls heavily on the rich compared to the poor.
Regressive taxation is a type of taxation which is completely opposite to progressive taxation. In this type of taxation, the burden of tax decreases as the income rises, i.e., higher the income, lower the tax rate. In regressive taxation the burden of tax falls heavily on the poor compared to the rich.
This type of taxation is a mixture of Progressive and proportional taxation. In degressive taxation, the tax charges is initially progressive in nature and after reaching a certain limit it becomes proportional in nature. In this case, the sacrifice is relatively lower on higher income when compared to smaller income.
Non tax revenue are those taxes which do not have a general compulsion on the wealth of a person. The major sources of non-tax revenue are prices, short/long term loans etc. The minor sources of non-tax revenue include: fees, fines, forfeitures, Escheats, Tributes & Indemnities, etc.
It is the chare which is levied on a person who is availing a service from the public authority or buying a commodity from the public authority. It is important to note that in case of price, public interest is not prominent, it is a payment for service of a business character.
It is the most important form of administrative non tax revenue. It is charged or rather it is a compulsory payment in return of a definite service which has been rendered in public interest. This fee is never more than the cost of the service rendered and there must be some public purpose present in the service rendered in order to charge a fee on it. It is important to note that in case of fees, public interest is prominent.
Fines are more of a punishment than a source of revenue. They are basically the penalties which are imposed for contravening the laws of the land.
These are the minor sources of non tax revenue. These kind of revenue included the security deposits which are fortified in case an under trial prisoner jumps bail or the money which is fortifies in case of non performance of a contract by the parties.
Escheat are also the minor source of non tax revenue. Escheat basically means acquisition of property/assets by the State, of a person dying heirless/without a successor.
TRIBUTE & INDEMNITIES:
They are minor source of extraordinary non tax revenue earned by the government, on payment by foreign countries. The Tributes are basically paid to the conqueror country as indemnity for the damages incurred during a war, etc.
Public (or Government) Revenue play a very important role in operating the finances of a country. They are the main source of income of the government and it is from this revenue that the government meets its expenditures.