Page 1 : 49, , , , 41° Introduction, 4.2 Sources of Public Revenue, 4.3 Objectives of Taxation, 4.4 Canons of Taxation, 4.5 Types of Taxation, (A) Direct Taxes, (B) Indirect Taxes, 4.6 Tax Base, 4.7. Tax Rates, , ee EE, The government performs various functions in the field of political,, social and economic activities to maximise social and economic, welfare. In order to perform these functions and duties, the, government requires large amount of resources. Such resources are, raised from various sources.. The resources raised in the form of, money are called public revenue. The important and common, sources of public revenue are taxes, income.from currency, market, borrowing, income from sale of public assets and public, undertakings, fines, fees, donations, etc.

Page 2 : 50 Business Economics-IV (S. Y.B.Com. SEM.), . 5 ic receipts and pubjj, Dalton makes a distinction ee — cc an revenue. The term public receipts has @ idiots incoina fro, term public revenue. While public receipts a ; all, sources such as taxes, income from currency, borro 1B Sales of, public assets, prices, fees, fines, gifts, etc. Public revenue does not, include public borrowings and income from the sale of public assets,, Thus income of government may be defined either in a broad or in, a narrow sense., Receipts of government of India are divided into Revenue receipts, and Capital receipts. Revenue receipts consist of tax revenue and, non-tax revenue. Tax revenue comprises taxes on income and, expenditure, taxes on property and capital transactions, and taxes, on commodities and services. Non-tax revenue consists of profits,, interest receipts, dividends and revenue from various administrative, services. Capital receipts comprise borrowing, internal and external,, recoveries of loans, etc., The sources of public revenue are broadly classified into tax revenue, and non-tax revenue., , , , Sources of Public Revenue, , -——, , Tax Revenue Non-tax Revenue, ) we © Administrative Revenue, , , , , , , , , , , , , , , , , , , , , , , , © Indirect Taxes (GST) Si ?, , , , Public Revenue, TAX REVENUE 51, , According to Dalton, “a tax isac, 3 . ‘ompulsory contrib; tic impose, , by a public authority, trespective of the san dato . 7, rendered to the tax payer in return, and not ii oe, for any legal offence.” He further stated that “a t sae, , f Y ser. ‘ax, by definition,, is a payment in return for which no dii i it, , quo is rendered to the tax payer.” aa at aos —, , reference to special benefits conferred,”, , A tax is a liability imposed upon the tax assesses ie. the citizens, who are liable to pay the tax. It is a liability to pay an amount on, account of the fact that the tax assessees have income of a minimum, amount from certain specific sources, or that they own certain, tangible or intangible property, or that they carry on certain, economic activities which have been chosen for taxation. A tax is, paid as per the determination of government. Generally, the tax, Tevenue accounts for a larger share in the total public revenue. Taxes *, have been classified into direct and indirect taxes:, , (@) Direct taxes are imposed on income and wealth. e.g. income, tax, wealth tax, etc., , (b) Indirect taxes are imposed on purchase or sale of commodities, e.g. Sales tax, Excise and Custom duties or Goods and Services, , Tax (GST)., CHARACTERISTICS OF A TAX, , lL Ataxisa compulsory payment to the government. The es ', who becomes liable to pay tax should pay the at so, Pay the tax is an offence and will be met with punishment.

Page 3 : Business Economics-IV (S.Y.B.Com. : SEM-IV), , ; -pro-quo between the tax payer and the public, rg oo that the tax payer cannot claim any, specific benefit in return for the payment of a tax., , ‘There is no direct give and take relationship between a tax., payer and the tax - levying public authority., , Every tax involves some sacrifice on the part of the tax payer,, , NON TAX REVENUE, , received by the government from sources other than, a alae is me oo revenue. As compared to tax, revenue, non tax revenue may be compulsory or voluntary. It renders, Denefits to individuals concerned, for e.g. prices, fees etc. Generally,, aon tax revenue accounts for a smaller share in the total revenue., Following are the important sources of non tax revenue., , L, , Administrative Revenues: The government while performing, its administrative functions derives certain revenues. Therefore, they are termed as administrative revenues. The important, sources of these revenues are :, , (a) Fees : A fee is charged by public authorities for rendering, a service to the people. Seligman has defined fees as a, payment to defray the cost of each recurring service, undertaken by the government, primarily in the public, interest, by conferring a measurable special advantage to, the tax payer. Thus, a fee is that revenue which is paid to, the government for the special services rendered by it., Generally, a fee is charged to cover the cost of service but, it may be in excess of cost. In case of excess charges, a fee, contains an element of a tax. e.g. Tegistration of births,, , lumpsum Payment in exchange of receivi such i, t ‘ing such services., a. a fee renders direct benefit to the payer, but the, are also charged to rant permission or to impose, control over some activities, .g. driving license., If we compare taxes and fees, we find that,, , (i) Tax is compulsory, , payments Payment, fees are not compulsory, , , , Public Revenue, , (b), , =, , (c), , : 53, (ii) Fees are paid for Speciall i, : rn i, Paid for collectively povided eee’ aa, , (ili) There is some sort of uid. i, : pr, there is none in case a — in case of fees, but, , to act as deterrents,, , a ee charge from offenders of law. They, , pulsory payments without any quid-pro. 0., they differ from taxes because they pa a ei sti, or to.curb certain offences and not to earn income for the, government. Fine imposed on violation of traffic rules, fine, on late payment of bills are the examples in this context., They account for a small portion in total revenue,, , Special Assessment (or a betterment levy) : Seligman, defines it as “a compulsory contribution levied in, Proportion to the special benefit derived, to defray the cost, of a specific improvement to property undertaken in the, public interest.” It is a special charge collected from certain, members of the community who receive certain special, benefits from government activities or projects. e.g. park, facilities, irrigation facilities, road construction, etc. Such, facilities may provide a special benefit to those possessing, Properties in that area. This may appreciate values of such, Properties in that area, and therefore the authorities charge, special assessment to cover the cost and for various other, reasons. ie hig Sniper Soret leteemleae ;, compulsory but has a quid-pro-quo. Payment of s, porches those who are benefited and therefore have, been asked to pay, is compulsory., , Public authorities are empowered to levy this ere, However, there are three elements which are essentia', , it. They are :

Page 4 : Economics-IV (S.Y.B.Com. : SEM-IV), Business, , d by th, 4) some public purpose must be served by the, ” improvement scheme,, , individuals must be, i ji ts derived by #, (ii) the special, , measurable, , ii) the rates levied by the authorities should be, uty, , ortional, , to those, , a sells certain goods,, i ii , etc, and services like transport ‘, oe tion, electricity, water supply, etc. in public, i cat Prices are the revervses derived by the government, through sale of these goods and services. Price is paid by, those persons who buy the goods and services produced, by the government and, therefore, it is not a compulsory, payment. Itis a voluntary payment., , Profits blic Enterprises : In order to provide ‘merit, , * aon. owns and operates many, undertakings in the interest of the community. In this, process, the government earns profit from state or public, enterprises. e.g. surplus earnings from railways, State, transport, banks, etc., , These surplus earnings depend on prices which are, charged for goods and services produced by the state, enterprises. Some prices just cover the cost of production, and some are in excess of cost which help to earn ‘Surplus, revenue’. Profit is an important source.of revenue to the, government. However, this source is small as compared, to taxation and borrowing. At the same time it is important, because (1) itreflects the, , efficiency of state enterprises and, (2) it can be an important 5, , ee ource of investment for, providing better services, ., , soci _ ‘s When financial assistance is received from, ‘ermment to another government it is known ts., In the case of India a fi ‘a “te guise, , ; assistance from the central to the, State government is known as grants in-aid. A financial, assistance from one country’s Sovernment to another country’s, governments known as foreign aid. This is generally received, , a..., , , , Public Revenue, , 55, by underdeveloped or developing countries for various, , The gifts and donations are made in cash or in kind by patriotic, people or institutions. These sources are voluntary. They are, not certain and fixed source of revenue of the government and, they are also out of control of the government. Their significance, , as a source of public revenue have been gradually declining, over the years., , Deficit Financing : In an ordinary sense deficit financing, implies an excess of public spendings over public revenue. The, gap is filled by additional taxes, borrowing or printing more, currency", This method is inflationary because it adds toexisting, money supply in the economy and creates new demand for, goods and services. It leads to the rise in price level, The effect, of the use of deficit financing is almost the same as that of taxing, the people because both the operations ultimately result in, taking away some resources from the market. Most of the, , developing countries are resorting to this method in order to, finance their rising expenditure., , Borrowings : When the budgeted public expenditure exceeds, the budgeted public revenue, the gap is filled by resorting to, borrowing. It may be compulsory or voluntary. They may be, internal or external, i.e. domestic borrowing or foreign, borrowing. They have a repayment liability with interest., , , , 1. In India, the FRBA Act, (2003) prohibits the Government from borrowing, , directly from RBI. However the Act provides an escape clause which states, that, "the RBI could subscribe to the primary issue of Central Government, Securities in case the government exceeds the fiscal deficit target on grounds, of national security, act of war, national calamity, collapse of agriculture, Severely affecting farm output and incomes, a structural reforms in the rae, with unanticipated fiscal implications, decline in real cutee seen as, quarter by at least three percent points below its average of the previo Se, quarters",

Page 5 : Business Economics-IV (S.Y.B.Com. : SEM-Iy), , * ., Miscellaneous Sources : This includes revenues received from, . le of public assets, claim of state to private Properties, cochimed tank deposits, etc. Income from public property ang, relatively minor source of receipts. The, , ee cee property in the forms of land ang, , aie i it may sometim,, buildin, gs and earns rent on it. The governmen y times, also resort to sale of some of its assets like gold, etc., in the, , market., , , , Tax is the major source of revenue for the government. The main, objective of tax is to raise revenue to meet the expenditure, tax is, used by the modem governments to achieve, atthe same time, many, other objectives too. Let us discuss below the main objectives of, taxation., , 1. To raise revenue to meet expenditure : Modern governments, no more confine to the essential activities prescribed by the, classical economists. Their activities are extended to the socioeconomic sphere, as is the case in India. The government,, therefore, through its budget attempts to raise as much revenue, as possible to meet its expenditure. Even the traditional, ae of sds and order and other basic social, , ° Tequire much more expenditure than what it was, earlier. Accordingly the government collects more revenue by, extending the tax base as well as tax rate wherever possible., , 2. Reduce inequality of income : As economic progress takes, pace People benefit in terms of their living standard., mployment, income, consumption and other economic, elements Positive improvement. Benefits of progress,, Ever, is not equally distributed. Thus, alongwith economic, , , , wealth. India's 2019-29, , surcharge, varying from 5 + 4% ;, more than 5 crore, to 42.7% on those with income, , Elimina\ ite absolute Poverty : Almost all the countries have some, of their population living below Poverty line. We in India have, about 22 percent of our population, below poverty line. India, has numerous programmes designed to help the poor. Huge, amounts of money is required to be spent for the schemes,, Accordingly, the government is required to have ways and, means including taxation to collect money to meet these, expenses. *, , Social and racial customs and discrimination has led to the, exploitation of some sections of the people in many countries., Caste system in India has historically resulted in socio-economic, backwardness of a section of the society. Efforts are done to, uplift these people by providing concessions, opportunities and, benefits. A part of the tax money is spent for this purpose., , Economic development and full employment : Market, economy functions to maximise profit. It is not interested in, promoting economic growth and development in a balanced, manner, Providing employment to all those who desire to be, employed is not the concern of the private sector. Supply of, public goods is not the responsibility of the market. Supply of, merit good like education and health is essential for the progress, and development of the society. All the above mentioned, activities are to be provided by the government. Money required, for them will have to be raised through taxes., , Promoting saving and investment : The objective of, development and full employment involves huge investment, which depends on savings. Taxation policy through proper tax, incentives should promote savings. Non-essential consumption,, including harmful consumption like tobacco and alcohol must, be discouraged through high tax rate. 3, , Pri : Wide fluctuation in price level resulting in, inflation and. deflation must be regulated and oe, through tax policy. Inflation may require oie ee, specially non-essential and luxurious goods al