principles of taxation

Public finance

Public Finance deals with the way in which the State acquires and expends its means of subsistence. That is the income and expenditure of public authorities. Public authorities include all sorts of governments- Central, state and local self governments.

Public revenue or income

As public expenditure is necessary for the government to perform its various functions for the welfare of the society, so it requires public revenue. The income of the government through all sources is called public income of public revenue.

Sources of public revenue

A. Permanent Revenues.

I. Regular revenues.

i.Derived directly from government ownership..

Revenues from public industries. a'. Industries publicly owned and managed. Industries publicly owned, but managed by lessees under a charter.

ii. Derived from the incomes of private persons and corporations.

a.Fees.

b.Special assessments.

c.Taxes.

II. Irregular and miscellaneous.

Fines and penalties:- refers to the punishment of penalty which is imposed for the infringement of law

Forfeits:- Penalties imposed by court for the failure of individuals to appear in the court to complete contract as stipulated etc

Escheats:- Escheat is a legal term used to describe a property that falls to the State in default of other heirs, ie the claim of a government to property of a person who dies without having any legal heirs or without keeping a will.

Conscience money," :- Conscience money is money sent without name by persons who have defrauded the government.

Gifts, etc

B. Temporary Revenues. (To be repaid.)

1. Public loans by the sale of bonds.

2. Public loans by the issue of treasury notes.

Public Loans. Public loans are a source of revenue that gives rise to public debts.

Fees and Special Assessments. Fees and special assessments closely resemble taxes, but they are of much less significance in the fiscal system. A fee is a "payment made to the State on the occasion of some specific service rendered by the State to the citizen the service, however, being noncommercial in character." The payment demanded for recording a deed or mortgage is a fee; so, also, is any court charge, or a charge for a teacher's certificate, a marriage license, etc. A special assessment, which is even more like a regular tax, has been defined as " a compulsory contribution, levied in proportion to the special benefits derived, to defray the cost of a specific improvement to property, undertaken in the public interest.

Taxes. The most important and most regular source of public revenues is taxation. Taxes are one-sided transfers of valuable things, exacted by public authority, chiefly from citizens

taxes should be proportioned (1) to benefits derived. But it is utterly impracticable to attempt to say what proportion of the general benefits of government accrues to particular individuals.

The Faculty Theory. A theory more generally accepted by economists to-day is that taxation (2) should be proportioned to "faculty," or ability to pay.

(a) Consumption; but it is evident that the consumption of the poor is out of all proportion to their ability to bear the burdens of the State.

(b) is property ; but property differs widely in its productiveness, and, moreover, many persons w c) by revenue or income, though even here we must note that incomes differ in permanence and security, and that equal incomes are called upon to support very unequal numbers of persons. ith little property have large incomes and therefore great ability to bear taxation.

Shall taxes be laid in direct proportion to revenue, or shall the rate be increased as the amount of revenue increases? The first method is called
(a) proportional taxation; the second,

(b) Progressive or graduated. Sometimes taxes are neither proportional nor progressive, but

(c) Regressive; that is, the rate diminishes as the taxed property or revenue becomes larger.

Another way of classification (Taylor)

1. Taxes
2. Commercial revenue
3. Administrative revenue
4. Grants and gifts

Adom’s smith:- revenue from people, revenue from states property

Prof. Adam:- direct revenue(Public projects, land and industry)

Derivative revenue (taxes, fees, fines)

Anticipatory revenue (sale of ……)

Ideal classification- Tax revenue

Non tax revenue (loan, educational institution, govt undertaking)

Seligman’s – Compulsory (tax) Gratuitous (gifts) contractual (govt enterprises)