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Concept
Government revenue
Summary
Government revenue or national revenue is money received by a government from taxes and non-tax sources to enable it to undertake public expenditure. Government revenue as well as government spending are components of the government budget and important tools of the government's fiscal policy. The collection of revenue is the most basic task of a government, as revenue is necessary for the operation of government, provision of the common good (through the social contract in order to fulfill the public interest) and enforcement of its laws; this necessity of revenue was a major factor in the development of the modern bureaucratic state.
Government revenue is distinct from government debt and money creation, which both serve as temporary measures of increasing a government's money supply without increasing its revenue.
There are a variety of sources from which government can derive revenue. The most common sources of government revenue have varied in different places and time periods. In modern times, tax revenue is typically the primary source of revenue for a government. Types of taxes recognized by the OECD include taxes on income and profits (including income taxes and capital gains taxes), social security contributions, payroll taxes, property taxes (including wealth taxes, inheritance taxes, and gift taxes), and taxes on goods and services (including value-added taxes, sales taxes, excises, and duties). Besides, lotteries can also bring in considerable revenue for the government. In early 2009, the Australian government used lotteries to boost spending, generating more than $60m in additional tax revenue for state governments.
Non-tax revenue includes dividends from government-owned corporations, central bank revenue, fines, fees, sale of assets, and capital receipts in the form of external loans and debts from international financial institutions. Foreign aid is often a major source of revenue for developing countries, and for some developing countries it is the primary source of revenue.
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Value-added tax
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. If the ultimate consumer is a business that collects and pays to the government VAT on its products or services, it can reclaim the tax paid. It is similar to, and is often compared with, a sales tax.
Transfer payment
In macroeconomics and finance, a transfer payment (also called a government transfer or simply fiscal transfer) is a redistribution of income and wealth by means of the government making a payment, without goods or services being received in return. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. Examples of transfer payments include welfare, financial aid, social security, and government subsidies for certain businesses.
Public finance
Public finance is the study of the role of the government in the economy. It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones. The purview of public finance is considered to be threefold, consisting of governmental effects on: The efficient allocation of available resources; The distribution of income among citizens; and The stability of the economy.