PRESENTATION ON

PUBLIC REVENUE

PUBLIC FINANCE ASSIGNMENT MADE BY :

SUBMITTED TO : DR VAIBHAV APON MAJUMDAR (367)
SUDHAKAR KHATRI
TANYA JAISWAL
VERTIKA
 CONTENT
• INTRODUCTION OF PUBLIC
REVENUE
• CLASSIFICATION OF PUBLIC
REVENUE
• SOURCES OF PUBLIC REVENUE
• TAX REVENUE
• NON TAX REVENUE
 PUBLIC REVENUE
The income of the government through all the sources is called
public income or public revenue.
According to Dalton, the term public income has two parts: 
1. Public Receipts:  2. Public Revenue: 
Considering public income in Considering public income in
wider sense, it includes all narrower sense, it includes only
the incomes or receipts those sources of income of public
which a public authority may authorities, which are ordinarily
secure during any period of known as "revenue resources."
time.
 SOURCES OF PUBLIC REVENUE
Taxa Revenue Non Tax Revenue
 TAX REVENUE
• A fund raised through the various taxes is
referred to as tax revenue. Taxes are
compulsory contributions imposed by the
government on its citizens to meet its
general expenses incurred for the common
good, without any corresponding benefits
to the tax payer.
• Seligman defines a tax thus: “A tax is a
compulsory contribution from a person to
the government to defray the expenses
incurred in the common interest of all,
without reference to specific benefits
conferred.
 Direct Taxes
Corporation Tax
Corporation Tax is Levied on profits of companies or associations

Personal Income Tax

Personal Income Tax is levied on the total income of individuals and Hindu Undivided Families (HUFs) following
some allowable deductions
In India, personal income tax is levied as a progressive tax, that is, individuals falling in higher income brackets are
subject to a higher tax rate. This ensures the equitable distribution of tax burden in the country.

Wealth Tax
Wealth Tax is Levied on the net wealth of individuals and HUFs

Transaction Tax (STT)

Securities Transaction Tax (STT) is imposed on the value of transactions involving delivery-based equity

Fringe Benefit Tax

Fringe Benefit Tax is imposed on the employer on the value of fringe benefits provided to employees for the latter’s
collective enjoyment.
 Indirect Taxes

Union (or Central) Excise Duties

Union (or Central) Excise Duties are Levied by the central government on the production of
the commodities in India. In recent years, excise duty is imposed on a very large number of
commodities.

CUSTOM DUTIES
Customs Duties are Levied on both imports and exports. Import duties in India are typically
levied on an ad valorem basis, that is, as a percentage of the price of the commodity.

Service Tax
Service Tax is Levied on services provided to individuals. Service tax was introduced in India
in 1994–95 to generate revenue from the rapidly growing service sector.
 Non tax Revenue
• The recurring income earned by the government from sources other than taxes.
• It plays a role in enhancing the national macro-control ability , mobilizing the enthusiasm of
local governments and departments , making up for the shortage of financial budget finds ,
setting up public welfare and promoting local economic development
 Some examples
Income from interest
Dividend
Fines
Fees and more
Example : when people available services offered by the government, like
electricity, telecommunication, DTH, broadband etc, they pay bills, which
include the share of non-tax revenue as the government provides infrastructure
support to facilitate the services. The government also collects interest as non-
tax revenue on the loans and funds advanced to states for various purposes. So,
the government collects non-tax revenue in return for providing/facilitating any
goods or services.
 Importance

• It is a source of earning for the

government.
• The amount of tax collection may
vary due to employment situation,
non tax revenue kepps the revenues
somewhat balanced.
• It is a steady flow of revenue from a
wide variety of sources.
• It also helps in recovering the cost of
services offered.
Table showing the various taxes collected throughout the years
 Sources
1.Fees: A fee is charged by public authorities for rendering a service to the citizens. Unlike tax, there is no compulsion involved
in case of fees. For example, fees are charged for issuing of passports, driving licenses, etc.

2.Fines or Penalties : Fines or penalties are imposed as a form of punishment for breach of law or non fulfillment or certain
conditions or for failure to observe some regulations. But while taxes are generally imposed to collect revenue. Fines are
imposed as a form of punishment or to prevent people from breaking the law. They are not expected to be a major source of
revenue to the government.

3.Surplus from Public Enterprises: The Government also gets revenue by way of surplus from public enterprises. In India, the
Government has set up several public sector enterprises to provide public goods and services. Some of the public sector
enterprises do make a good amount of profits. The profits or dividends which the government gets can be utilized for public
expenditure. This is because, the public gets goods and services, and the government gets prices, and consequently profits from
selling such goods and services.

4.Special assessment of betterment levy: It is a kind of special charge levied on certain members of the community who are
beneficiaries of certain government activities or public projects. For example, due to a public park in a locality or due to the
construction of a road, people in that locality may experience an appreciation in the value of their property or land. Thus, due to
public expenditure, some people may experience 'unearned increments' in their asset holding..
 Sources
5.Grants and Gifts: Gifts are Voluntary contributions by individuals or institutions to the government. Gifts are significant source of revenue
during war and emergency. A grant from one government to another is an important sources of revenue in the modern days. The
government at the Centre provides grants to State governments and the State governments provide grants to the local government to carry
out their functions. Grants from foreign countries are known as Foreign Aid. Developing countries receive military aid, food aid,
technological aid, etc. from developed countries.

6.Deficit Financing : Deficit means an excess of public expenditure over public revenue. This excess may be met by borrowings from the
market, borrowings from abroad, by the central bank creating currency. In ca se of borrowing from abroad, there cannot be compulsion for
the lenders, but in case of internal borrowings there may be compulsion.

7.Interest: It comprises of interest of loans given to states and union territories for reasons like non-plan schemes (e.g. flood control) and
planned schemes with maturity period of 20 years such as modernization of police forces and also interest on loans advanced to Public
Sector Enterprises (PSEs), Port Trusts and other statutory bodies etc.

8.Dividends and profits: This includes dividends and profits from PSEs as well as the transfer of surplus from Reserve Bank of India (RBI)

9.Petroleum license: This includes fees to get the exclusive right for exploration in a particular region. Such fees may be in the form of
royalty, share of the profit earned from contact areas during a specific period, Petroleum Exploration License (PEL) fee or Production Level
Payment (PLP).

10.Fees for Communication Services: This mainly includes the license fees from telecom operators on account of spectrum usage charges
that licensed Telecom Service Providers pay to the Department of Telecom (DoT).
 Sources
11. Fees for Communication Services: This mainly includes the license fees from telecom operators on account of
spectrum usage charges that licensed Telecom Service Providers pay to the Department of Telecom (DoT).
12. Broadcasting fees: It includes license fee paid by DTH operators, commercial TV services, commercial FM radio
services etc.
13. Road, Bridges usage fees: This includes receipts through toll plazas on account of the usage of national
highways, permanent bridges etc

Source of non tax by state government

Police services
Home guards
Electricity
Administrative services
Municipal services
Jobs through state public services
Long run disadvantages
of non tax revenue
• Increases burden on enterprises
• Disperses the financial resources of the
government
• Can have negative impact on economic
growth as non tax revenue and economic
growth are inextricably linked.
CLASSIFICATION
OF PUBLIC
REVENUE
 1. ADAM SMITH’S CLASSIFICATION
Adam Smith was of the opinion that revenue of the government ultimately depends on
the property in possession of the inhabitants of the country and the extent to which the
state has control over the wealth of the country. Adam Smith classified public revenue
into the following two categories:
1)      Revenue from Public: Revenue from public includes all those sources which
are generally known as the sources of revenue of the government from the public.

2)  Revenue from State Property: Revenue from state property includes revenue
obtained from public enterprises as well as those revenues which are derived from the
property in possession of the state.
This classification as given by Adam Smith does not serve the purpose of modern
finance. Hence it is subject to criticism.
2. BESTABLE’S CLASSIFICATION

•           : Like Adam Smith,

Bestable also classified public
revenue into the following two
categories:
•1)      Those incomes which
the state receives from its various
functions just like a private
individual or corporation. It
includes all the incomes which the
state derives in the form of fees
and prices.
•2)      Those incomes which
the state derives in its own
capacity as ‘state’. It includes
taxes and levies.
•Like Adam Smith this
classification is also limited and
narrow.
 3. ADAM’S CLASSIFICATIONS
•: Prof. Adam classified public revenue into the following three categories:
•1)      Direct Revenue: It includes income which the state derives from public land, public enterprises like
rail, roads, highways, posts and telegraph and all other revenues which the state derives on account of the
ownership of productive enterprises.
•2)      Derivative Revenue: It includes the income derived from the citizens, such as, taxes, fees
assessments, fines, penalties etc.
•3)      Anticipatory Revenue: It includes income from the sale of bonds or other forms of commercial credit.
It also includes income from the treasury notes.
•This classification suffers from the defect of overlapping and there is no clear-cut demarcation of different
heads. It has a wide range of revenues, as it includes both commercial and administrative revenues in one group
in spite of the fact that both are fundamentally different in nature. Hence this classification is also not
satisfactory.
4.SELIGMAN’S CLASSIFICATION
•: Seligman classified public revenue into the following three categories:
•1)      Gratuitous Revenue: Gratuitous revenue is that revenue which is derived by the government free of
cost, such as, gifts from the public and others.
•2)      Contractual Revenue: It is that revenue which is derived by the state as a result of the contracts
entered into between the public and government. It includes income from land mines and public enterprises.
•3)      Compulsory Revenue: It includes the income derived from state’s authority for administration, justice
and taxation, such as, taxes fees, fines etc.
•This classification suffers from various lacunae and may not be regarded as satisfactory. However, it is
more comprehensive that the earlier classifications already discussed.
5. LUTIZ’S CLASSIFICATIONS
•: Lutiz classified public revenue into the following six categories:
•1)      Administrative Revenue;
•2)      Commercial Revenue;
•3)      Taxation;
•4)      Public Debt;
•5)      Subventions and Grants; and
•6)      Book-keeping revenue or transfers.
•This classification is outdated and thus unsatisfactory. For example, the last three, i.e. public debt,
subventions, and grants and book-keeping revenues or transfers are not included in public revenue
now.
 6. DALTON’S CLASSIFICATION
• According to Dalton, there are two main sources of public revenue, i.e. taxes and prices. A tax is a
compulsory charge imposed by public authority, whereas prices are paid voluntarily by private
persons, who enter into contracts with authorities. Thus, taxes are paid compulsorily, whereas, prices
are contractual payments. Dalton classified public revenue into the following twelve categories

: 1.) TAXES, 2.) GIFTS AND REPARATIONS 3.)COMPLUSORY LOANS 4.) PUBLIC PROPERTY
5.) PUBLIC ENTERPRISES 6.) FINES IN COURTS 7.) FEES AND OTHER PAYMENTS
8.) SPECIAL ASSESSMENT 9.) PUBLIC MONOPOLIES 10.) MINT 11.) VOLUNTARY GIFTS
12.) TRIBUTES AND INDEMINTIES WHETHER ARISING OUT OF WAR OR OTHERWISE

As a matter of fact, it is not a classification of public revenue on some sound principles, but actually
it is a list of items enumerated above.
 7. TAYLOR’S CLASSIFICATION

•Taylor classified public revenue into the following four categories:

•1)      Grant-in-aid: Grant-in-aid are the means by which one government provides
financial assistance to another, usually in the performance of a specified function in a
specified manner, e.g. education and health. Grants are made to the state government by
the central government for some specific purpose. The state government has no obligation
to repay the amount of grant-in-aid sanctioned by central government.
•2)      Administrative Revenue: These revenues include fees, licenses, fines
forfeitures, escheat and special assessment. Most of these are voluntary in nature on the
part of the payer as to whether or not he will pay and more or less for the direct benefit
conferred upon him. They generally arise as a by-product of administrative control or
function of government, and hence, they are called as administrative revenue by Taylor.
•3)      Commercial Revenue: These revenues are received in the form of prices paid
for government-produced commodities and services, such as, payments for postage, tolls,
tuition fee of public educational institutions, interest on funds borrowed from government
credit corporations, price paid for liquor in government stores, electricity and water
distributed by government authorities etc.
•4)      Taxes: Taxes are compulsory payments to government without expectation of
direct return in benefit to the tax-payer, such as, income-tax, toll-tax, property tax etc. they
involve varying degrees of coercive powers.
 8. J.K MEHTA’S CLASSIFICATION

• J.K MEHTA classified public revenue based on objective of the government, primarily
the argues of two main base of classification i.e
• GOVERNMENT needs money and revenue resources for discharging thr necessary
functions it has to perform, and
• Government wants to charge the existing pattern of economic behaviour of the people.
based on the two objective j.k mehta has come up with three class of public revenue as follows
- Tax - when the object is to obtain money for the finance of services (production of goods
included), the levy should be regarded as tax.
-Fee- a levy, which has the object of discouraging the consumption of goods and services
performed by the state has been called as fee.
-Duty- if the object is to discourage the production or the use of commodities produced by
private agencies or functions performed by such agencies, the levy has been called as Duty.
 9. GENERAL CLASSIFICATION
• Putting all the classification made by different economist and scholars of
all time there is another classification which is generally accepted as the
most comprehensive classification of different sources of public
revenue.
• Tax revenue- It includes incomes to the government through direct taxes and
indirect taxes which are further classified as, Direct Tax – Income tax, wealth
tax; corporate tax etc. Indirect tax- consumption , production , sales , excise
tax etc.
• Non Tax revenue- The revenue, which is not collected through tax but,
through other methods which are optional and not much compulsory are
called non-tax revenue.
Canons of Taxation:
The canons of taxation were first presented by Adam Smith in his famous
book ‘The Wealth of Nations’. These canons of taxation define numerous rules
and principles upon which a good taxation system should be built. Although
these canons of taxation were presented a very long time ago, they are still
used as the foundation of discussion on the principles of taxation.
Adam Smith originally presented only 4 canons of taxation, which are also
commonly referred to as the ‘Main Canons of Taxation’ or ‘Adam Smith’s
Canons of Taxation’. Along with the passage of time, more canons were
developed to better suit the modern economies. In the following article, you
will read the 9 canons of taxation that are most commonly discussed and used.
Adam Smith's Canons of Taxation:
Adam Smith originally presented the following four canons of taxation. The
rest were developed later:
1. Canon of Equality
2. Canon of Certainty
3. Canon of Convenience
4. Canon of Economy
Other 5 canons of taxation are:
5.Canon of Productivity
6.Canon of Simplicity
7.Canon of Diversity
8.Canon of Elasticity
9.Canon of Flexibility
1. Canon of Equality:
The word equality here does not mean that
everyone should pay the exact, equal
amount of tax. What equality really means
here is that the rich people should pay
more taxes and the poor pay less. This is
because the amount of tax should be in
proportion to the abilities of the taxpayer.
It is one of the fundamental concepts to
bring social equality in the country.
The canon of equality states that there
should be justice, in the form of equality,
when it comes to paying taxes. Not only
does it bring social justice, it is also one of
the primary means for reaching the equal
distribution of wealth in an economy.
2. Canon of Certainty:
The tax payers should be well-aware of the
purpose, amount and manner of the tax
payment. Everything should be made clear,
simple and absolutely certain for the benefit
of the taxpayer. The canon of certainty is
considered a very important guidance rule
when it comes to formulating the tax laws
and procedures in a country. The canon of
certainty ensures that the taxpayer should
have full knowledge about his tax payment,
which includes the amount to be paid, the
mode it should be paid in and the due-date.
It is believed that if the canon of certainty is
not present, it leads to tax evasion.
3. Canon of Convenience:
Canon of convenience can be understood as
an extension of canon of certainty. Where
canon of certainty states that the taxpayer
should be well-aware of the amount, manner
and mode of paying taxes, the canon of
convenience states that all this should easy,
convenient and taxpayer-friendly. The time
and manner of payment must be convenient
for the tax payer so that he is able to pay his
taxes in due time. If the time and manner of
the payment is not convenient, then it may
lead to tax evasion and corruption
4. Canon of Economy:
The whole purpose of collecting taxes is to
generate revenue for the company. This
revenue, in turn, is spent on public welfare
projects. The canon of economy – keeping in
view the above-mentioned purpose – states
that the cost of collecting taxes should be as
minimum as possible. There should not be
any leakage in the way. In this way, a large
amount of the collections will go directly to
the treasury, and therefore, will be spent in
the government projects for the welfare of
the economy, country and the people. On
the other hand, if the canon of economy
isn’t applied and the overall cost of
collecting taxes is unreasonably high, the
collected amount will not be sufficient in the
end.
5. Canon of Productivity:
By virtue of the canon of productivity, it is
better to have fewer taxes with large
revenues, rather than more taxes with lesser
amounts of revenue. It is always considered
better to impose the only taxes that are able
to produce larger returns. More taxes tend
to create panic, chaos and confusion among
the taxpayers and it is also against the
canon of certainty and convenience to some
extent.
6. Canon of Elasticity:
An ideal system of taxation should consist of
those types of taxes that can easily be
adjusted. Taxes, which can be increased or
decreased, according to the demand of the
revenue, are considered ideal for the system.
An example of such a tax can be the income
tax, which is considered very much ideal in
accordance with the canon of elasticity. This
example can also be taken in accordance
with the canon of equality. Flexible taxes are
more suited for bringing social equality and
achieving equal distribution of wealth. Since
they are elastic and easily adjustable, many
government objectives can be achieved
through them.
7. Canon of Simplicity:
The system of taxation should be made as
simple as possible. The entire process should
be simple, non-technical and
straightforward. Along with the canon of
certainty, where the amount, time duration
and manner of payment is made certain, the
canon of simplicity avoids cases of
corruption and tax evasion if the entire
method is made simple and easy.
8. Canon of Diversity:
Canon of diversity refers to diversifying
the tax sources in order to be more
prudent and flexible. Being heavily
dependent on a single tax source can be
detrimental for the economy. Canon of
diversity states that it is better to collect
taxes from multiple sources rather than
concentrating on a single tax source.
Otherwise, the economy is more likely to
be confined, and hence, its growth will be
limited as well.
9. Canon of Flexibility:
Canon of flexibility means that the entire
tax system should be flexible enough that
the taxes can easily be increased or
lowered, in accordance with the
government needs. This flexibility ensures
that whenever the government requires
additional revenue, it can be generated
without much hassle. Similarly, when the
economy isn’t booming, lowering taxes
shouldn’t be a problem either.