Tax revenue

Tax revenue

Tax revenue is the income that is gained by governments because of taxation of the people.

Just as there are different types of tax, the form in which tax revenue is collected also differs; furthermore, the agency that collects the tax may not be part of central government, but may be an alternative third-party licenced to collect tax which they themselves will use. For example:
* In the UK, the DVLA collects road tax, which is then passed on the treasury

Tax revenues on purchases can come from two forms: 'tax' itself is a "percentage" of the price added to the purchase (such as sales tax in US states, or VAT in the UK), while 'duty' is a "fixed amount" added to the purchase price (such as is commonly found on cigarettes). In order to calculate the total tax raised from these sales, we must work out the effective tax rate multiplied by the quantity supplied.

Changes in taxation level

The effect of a change in taxation level on total tax revenue depends on the good being investigated, and in particular on its price elasticity of demand. Where goods have a low elasticity of demand (they are price inelastic), an increase in tax or duty will lead to a small decrease in demand - not enough to offset the higher tax raised from each unit. Overall tax revenue will therefore rise. Conversely, for goods which are price elastic, an increase in tax rate or duty would lead to a fall in tax revenue.

Laffer curve

The Laffer curve theorises that, even price inelastic goods (such as addictive necessary items), there will be a tax revenue maximising point, beyond which total tax revenue will fall as taxes increase. This may be due to a number of causes:
* A cost limit on what can actually be afforded
* The existence of expensive substitutes (which become relatively less expensive)
* An increase in tax avoidance (through the black market or similar)

Revenue Administration

Public Sector:A limiting factor in determining the size of a budget in the public sector is the capacity to tax. Per capita personal income is the most often used measure of relative fiscal capacity. But this measure fails to base tax capacity computation on other important tax bases like the sales and property tax and corporate income taxes. A representative tax system should assess the level of personal income, the value of retail sales and the value of property to compute fiscal capacity. To do so the average tax rate for each base is computed by dividing the total revenue derived by the total value of the base. Thus, as an example, income taxes collected would be divided by total income to yield a rate of taxation.

"'Personal Income Tax Sales Tax Property Tax Corporate Tax total revenue total revenue total revenue totel revenue"'The averages of each tax base can be used in comparison to other states or communities, that is, the average of other states or communities, to determine whether or not a government compares favorably regionally or nationally. A state or community's standing on these various bases may affect its ability to attract new industry. The resulting rates, high or low in comparison, can become targets for change.The mission of revenue administration is to provide prudent and innovative revenue, investment and risk management and to regulate the use of government capital.

"There are four core responsibilities for the revenue administrator:1. Manage and invest financial assets prudently. 2. Administer tax and revenue programs fairly and efficiently. 3. Manage risk associated with loss of public assets. 4. Regulate capital expenditures. Example of Balance: The Conflict of Economic Development and the Tax Base"

New real estate development may not only enhance the economic base of a state or community, and it may also expand the tax base. It is not always the case, however, that new developments, especially if not properly planned, can in the aggregate, have a negative impact on the tax base. Economic development traditionally focuses on such things as job generation, the provision of affordable housing, and the creation of retail centers. Tax base expansion focuses primarily on maintaining and enhancing real estate values within the municipality. Municipalities tend to pursue economic development with almost a religious fervor, and often do not think strategically about the overall real estate impacts of their economic development initiatives. Yet the existing tax base in almost every municipality throughout the United States is an important source of revenue for funding municipal and school expenditures.

For public sector officials it is important to recognize the potential for a conflict between these two distinct, yet overlapping areas of public policy, and to establish procedures to achieve the proper balance in this regard. For real estate investors it is important to recognize when public policy is not fully cognizant of the impact of its actions on the real estate market, because of the potential negative impact on property values.

In summary, the concept of tax base management is really one of asset management and is particularly important in States where municipalities derive much of their revenue from their real estate assessments. City officials in Concord, New Hampshire found that a five percent overall increase in the assessed value of existing property would have the same impact on the tax rate as the addition of convert|2000000|sqft|m2 of new industrial property or convert|1000000|sqft|m2 of new office/R&D development, both of which are likely to take fifteen or more years to realize.

In addition to being responsible for managing the tax base, a community should also be responsible for helping to ensure economic prosperity for its citizens. These two goals can be in conflict unless a long-term view is taken regarding public policy actions, and unless the impact of alternate development actions and programs and priorities are not carefully evaluated. Good tax base management may lead to even better economic development, because investors and businesses will want to be in a community. Instead of offering incentives to attract business, they may be willing to pay to come to a community because it’s a good place to live, work, shop and play.


Wikimedia Foundation. 2010.

Игры ⚽ Нужна курсовая?

Look at other dictionaries:

  • tax revenue — noun government income due to taxation • Syn: ↑tax income, ↑taxation, ↑revenue • Derivationally related forms: ↑tax (for: ↑taxation) • Hypernyms: ↑ …   Useful english dictionary

  • Non-tax revenue — Part of a series on Government Public finance …   Wikipedia

  • Federal tax revenue by state — This is a table of the total Federal tax revenue by state collected by the U.S. Internal Revenue Service in 2007.Gross collections indicates the total Federal tax revenue collected by the IRS from each U.S. state, the District of Columbia, and… …   Wikipedia

  • Tax avoidance and tax evasion — Tax avoidance is the legal utilization of the tax regime to one s own advantage, in order to reduce the amount of tax that is payable by means that are within the law. By contrast tax evasion is the general term for efforts to not pay taxes by… …   Wikipedia

  • revenue — rev‧e‧nue [ˈrevnjuː ǁ nuː] noun [uncountable] 1. also revenues ACCOUNTING FINANCE money that a business or organization receives over a period of time, especially from selling goods or services: • …   Financial and business terms

  • Tax increment financing — Tax Increment Financing, or TIF, is a public financing method which has been used for redevelopment and community improvement projects in the United States for more than 50 years. With federal and state sources for redevelopment generally less… …   Wikipedia

  • Tax system in China — Taxes provide the most important revenue source for the Government of the People s Republic of China. As the most important source of fiscal revenue, tax is a key economic player of macro economic regulation, and greatly affects China s economic… …   Wikipedia

  • Tax shelter — Tax shelters are any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments. The methodology can vary depending on local and international tax laws.In North… …   Wikipedia

  • revenue tax — ➔ tax1 …   Financial and business terms

  • List of countries by tax revenue as percentage of GDP — This table lists countries by total 2005 tax revenues (federal, state, and local) as a percentage of GDP (Gross Domestic Product). The data for EU (European Union) countries and Norway is from EUROSTAT (Statistical Office of the European… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”