Government revenue refers to the income of the government. They are revenues accruing to the government from taxation, excise duties, customs, or other sources, which are appropriated to the payment of the public expenses.
Sources of Government Revenue
- LICENSE FEES
- FINES AND PENALTY
- GIFTS AND GRANTS
- SURPLUS OF PUBLIC SECTOR UNITS
A Tax is a compulsory contribution to government revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.
The essence of a tax, as distinguished from other charges by the government, is the absence of a direct quid pro quo (i.e., exchange of favour) between the tax payer and the public authority.
Fees are payments made to government in exchange for advice or services.
Rates refer to local taxation, i.e., taxation levied by (or for) local rather than central government
License fee is an amount of money paid by an individual or business to a government agency for the privilege of performing a certain service or engaging in a certain line of business
FINES AND PENALTY
They are the charges imposed on persons as a punishment for contravention of a law. The main purpose of these is not to raise revenue from the public but to force people to follow law and order of the country.
GIFTS AND GRANTS
Gifts are voluntary contribution from private individuals or non-government donors to the government fund for specific purposes.
These include loans from the public in the form of deposits, bonds, etc. and also from the foreign agencies and organisations.
SURPLUS OF PUBLIC SECTOR UNITS
The government earns revenue from the production of commodities like steel, oil, etc., and from rendering services like train, city bus, electricity, transport, water supply, etc.
Government expenditure are the total expenses of the public authorities at all the sectors of the economy (federal, state and local) in the country. They include both recurrent and capital expenditure.
Classification of government expenditure
- Capital Expenditure
- Recurrent Expenditure
Capital expenditure: These are expenses on fixed assets such as roads, buildings, facilities and equipment.
Recurrent expenditure: These are the expenditure on goods and services which do not result in the creation or acquisition of fixed assets. They include wages, salaries and supplements, purchases of goods and services and consumption of fixed capital (depreciation).
DIFFERENCES BETWEEN CAPITAL EXPENDITURE AND RECURRENT EXPENDITURE
Recurrent expenditure refers mainly to expenditure on operations, wages and salaries, purchases of goods and services, and current grants and subsidies. … Capital expenditure is primarily expenditure on the creation of fixed assets and on the acquisition of land, buildings and intangible assets.
An intangible asset is an asset that is not physical in nature.
Objectives of government expenditure
- Provision of social goods
- Improve Public Services
- Increase Productive Capacity of Economy
- Expansionary Fiscal Policy
- Reduce Inequality
- Remove unemployment
- Increase Production
- Exploitation and Development of Mineral Resources
- Promote Price Stability
- Promote Balanced Growth
Factors contributing to the increase in government expenditure
- Unemployment problem in the country.
- Payment for social security causes
- Expenditure on war
- Increase in national debt
- Huge cost of administration
- Defense or security
- Increase in the population of the country
- Increase in poverty rate will also increase government expenditure
The effects of public expenditure
- Effects on production
- Effects on distribution
- Effects on growth and development
- Effects on economic stability
If you found this site and it's content useful and relevant to you, support and help us keep the site running so we can continue to give you solid educational updates. Click here to donate now thanks.