Explain non-tax sources of revenue of the Government.
Non-tax revenue refers to the revenue received by the government administration, public enterprises, gifts, and grants, etc. These sources are different than taxes.
The various nontax sources of revenue are as follows:
- Fees: A tax is paid compulsorily without any return service whereas, the fee is paid in return for certain specific services rendered by the government. For example - education fees, registration fees, etc.
- Prices of public goods and services: Modern governments sell various types of commodities and services to the citizens. A price is a payment made by the citizens to the government for the goods and services sold to them. For example - railway fares, postal charges, etc.
- Special Assessment: The payment made by the citizens of a particular locality in exchange for certain special facilities given to them by the authorities is known as ‘special assessment.’ For example - local bodies can levy a special tax on the residents of a particular area where extra/special facilities of roads, energy, water supply, etc. are provided.
- Fines and Penalties: The government imposes fines and penalties on people who violate the laws of the country. The objective of the imposition of fines and penalties is not to earn income, but to discourage the citizens from violating the laws framed by the Government. For example - fines for violating traffic rules. However, the income from this source is small.
- Gifts, Grants, and Donations: The government may also earn some income in the form of gifts by the citizens and others. The government may also receive grants from foreign governments and institutions for general and specific purposes. Foreign aid has become an important source of development finance for a developing country like India. However, this source of revenue is uncertain in nature.
- Special levies: Special levy is charged on commodities whose consumption is harmful to the health and well-being of citizens. Like fines and penalties, the objective is to discourage the consumption of such commodities. For example - duties levied on wine, opium, and other intoxicants.
- Borrowings: The government can borrow from the people in the form of deposits, bonds, etc. It also gets loans from foreign governments and organizations such as IMF, World Bank, etc. Loans are becoming a more and more popular source of revenue for governments in modern times.