-INDIAN PERSPECTIVE

• Government needs to perform political, social and economic duties so as to maximize social and economic welfare. In order to perform these duties and functions government requires large amount of resources .

• Various sources of revenue to the governments, viz. Central, State and Local Governments, are called Public Revenues.

• Development of agriculture, industries & infrastructure, defense, maintenance of law & order, conducting elections, serving public debt & any unforeseen expenses.

“It was only for the good of his subjects that he collected taxes

from them, just as the Sun draws moisture from the earth to give it

back a thousand fold" –

--Kalidas in Raghuvansham

• Kautilya's Arthasastra, written sometime in 300 B.C.was the first authoritative text on public finance, administration and the fiscal laws in this country. A major portion of Arthasastra is devoted by Kautilyato financial matters including financial administration.

• Collection of land revenue formed an important source of revenue to the State. The State not only collected a part of the agricultural produce which was normally one sixth but also levied water rates, octroi duties, tolls and customs duties.

• Taxes were also collected on forest produce as well as from mining of metals etc. Salt tax was an important source of revenue. Collection of Income-tax was well organized and it constituted a major part of the revenue of the State.

• A big portion was collected in the form of income-tax from dancers, musicians, actors and dancing girls, etc. This taxation was not progressive but proportional to the fluctuating income. General Sales-tax was also levied on sales and the sale and the purchase of buildings was also subject to tax. Even gambling operations were centralised and tax was collected on these operations.

• According to him, the power of the government depended upon the strength of its treasury. He states –"From the treasury, comes the power of the government, and the Earth whose .ornament is the treasury, is acquired by means of the Treasury and Army “.

• The land revenue was fixed at 1/6 share of the produce and import and export duties were determined on advalorem basis.The import duties on foreign goods were roughly 20 per cent of their value. Similarly, tolls, road cess, ferry charges and other levies were all fixed. Kautilya's concept of taxation is more or less akin to the modern system of taxation. His over all emphasis was on equity and justice in taxation.

INTRODUCTION *** ARTICLE 112 OF THE CONSTITUTION OF INDIA STATES THAT “AN ANNUAL FINANCIAL STATEMENT WILL BE PLACED BEFORE LOKSABHA AND RAJYA SABHA . THIS IS CALLED BUDJET OF THE GOVERNMENT”. SIMILIARLY, EACH STATES GOVERNMENT IS REQUIRED AN ANNUAL FINANCIAL STATEMENT. THE MAIN COMPONENTS OF A BUDJET IS REVENUE RECEIPTS OF THE GOVERNMENT FROM VARIOUS SOURCES. FOR MEETING THE REVENUE EXPENDITURE OF THE GOVERNMENT. THE OBJECTIVE , MEANING AND COMPONENTS OF REVENUE RECEIPTS ARE AS FOLLOWS.

GOVERNMENT THROUGH FISCAL TOOLS OF TAXATION ,SUBSIDIES AND TRANSFER PAYMENTS BRING

ABOUT ‘FAIR’ DISTRIBUTION OF INCOME AND WEALTH AS A WAY TO BRING SOCIAL JUSTICE .

• To contribute to economic development

• Reallocation of resources

• Mobilization of economic surplus

• Increasing the incremental saving ratio

“Government needs to perform various activities in the field of political ,social and economic to maximize social and economic welfare . In order to perform these duties and functions government require large amount of resources . This resources are called Public Revenues .”

Sources of public

revenue

Tax revenue

Direct Tax

Income tax

Corporate tax

Wealth Tax

Indirect tax

VAT

GST

Custom & Excise duty

Non Tax Revenue

Interest

Fine & Penalties

Fee

Capital Receipt

Internal & External

borrowing

Small Saving

Provident Fund

Loan recovery

Tax revenue refers to the income that is gained by the government through taxation.It may be in the form of :-

• Direct Tax

• Indirect Tax

The term direct tax generally means a tax paid directly to the government by the persons on whom it is imposed. Such as :- income tax etc.

SOURCES OF DIRECT TAX :-

• Income tax

• Corporate tax

• Wealth tax

• Interest tax

• Securities transaction tax

An Indirect Tax is one in which the burden can be shifted to others. The tax payers is not the tax bearer. The impact and incidence of indirect taxes are on different persons. An indirect tax is levied on and collected from a persons who manages to pass it on to some other person or persons on whom the real burden of tax falls. For e.g.. commodity taxes or sales tax etc. are Indirect Taxes.

SOURCES OF INDIRECT TAX:-

• Central Excise duty

• Custom duty

• Service tax

• Other tax and duties

NON TAX REVENUE :-The union government gets revenue from other sources as well. They are collectively calledas non-tax revenues. Thus, revenues mobilized from sources other than taxes are called non-tax revenue. Central Government mobilized Rs. 1,02,378 crore from this source during 2007- 08 (BE). The sources of non –tax revenue are explained below. Non-tax revenue has 12 percent share in the total revenue of central government. The expected revenue from his source in 2010-11 is 11 percent.

SOURCES OF NON TAX REVENUE :-• fee

• Fine & penalties

• Surplus from public enterprises

• Grants & gifts

• Deficit financing

When revenue mobilized through tax and non-tax sources is insufficient to meet its expenditures, the central government will try to mobilize income through capital receipts.

SOURCES OF CAPITAL RECEIPTS :-

• Internal & external borrowings.

• Small savings

• Provident funds

• Loan recovery

Just and Equitable

Progressive

Elastic

Productive

Anti-Inflationary

Effective

Certain

Arbitrary

Unpopular

Inconvenient

Evasion

Uneconomical

Narrow Base

Tax on Honesty

MERITS

Convenient

No Tax Evasion

Broad Tax Base

Social Value

Economical

Effective

Progressive

DEMERITS

Unjust

Inflationary

Uncertain

Savings Affected

Not Economical

No Link

Inequitable

TAX COLLECTION

• Revenue earned by the government is used to incure developmental and non-developmental expenses.

• Government should design ways to develop multiple sources of revenue to reduce dependence on any one.

• A just and fair tax system should be designed keeping in mind equal distribution of wealth and transparency in economy for overall development of the country.

• A good tax system is required for the over all development of any economy.

“We can say that Public Revenue is like soul of any country’s economy .“