Any government across the world needs revenue for it to function. Only through the money it raises will it be able to spend for its people. This expenditure could be done for many reasons. Whether it is for healthcare or education, it is the duty of the government to do it. This is why they have been chosen by the people. It does not matter what type of government is in place, the need to use revenue to improve people’s lives is a primary responsibility of it.
How do governments earn revenue ?
The answer lies in the two types of sources that it has. The first source is known as tax revenue and as the name suggests, it is any money that is earned from a tax that is levied. Examples of this include income tax and property tax. The other way that a government can earn is with the help of what is known and non-tax revenue. An example of this type of revenue would be any sort of fine collected by them. If you pay a fine for getting a parking ticket, that would fall under non-tax revenue. The number of people on this planet is always on the rise. This means that government need to increase their spending to meet the needs of the people. To do this, they need more revenue. This is how they can achieve that. This will include both tax and non-tax forms of revenue.
1. Cut Down On Unnecessary Expenses
It is a fact that many government officials around the world, lead a very comfortable even if the situation in other parts of the country may be different. While it is necessary for a government to take care of its members, it needs to care for its people as well. Cutting down on costs will increase the amount of revenue it has. The concerned authorities must make an effort to identify where money is being spent needlessly. And once they are found, these costs must be eliminated. Sometimes, just by streamlining things, you can move towards your target which in this case would be to increase revenue.
2. Carbon Tax
Though this isn’t a tax that is levied everywhere, it may soon become necessary. The condition of the environment is deteriorating with every passing year so there is a need to fight that. A major reason for this are the carbon emissions that are produced. And if the people have a large carbon footprint, it would be possible to tax them for it. Once people know that they will be taxed for their actions, they will be less likely to do it. Though this may sound counterproductive, the government is surely going to raise revenue in the short-term at least.
3. Foreign Aid
Ideally, a government would like to raise its own revenue and not depend on others. But sometimes, this may simply not be possible. In a crunch situation like this, this might be the only option available. Even if the amount received is little, it is going to be of use to the government. In some cases, it is also possible to receive aid in the form of a gift where you would not have to pay it back. Though it is a viable option, it would be wiser to have it as a last resort only.
4. Strictness In Collection
If the government is lax about the collection of tax, it allows people the time to find a loophole and escape from it. This cannot be allowed to happen. Taxes are one of the primary sources of revenue to the government has to ensure that it is collected. If someone does not pay their taxes, they should be made to pay a large fine. This will encourage other people to do the needful. If they can get all that they should be getting, the government can really work towards the benefit of the people.
5. Progressive Taxation
In many countries, there is a fixed tax rate. This is especially true in the case of income tax. A scenario like this is not really helping in raising revenue. The rich people are paying a small proportion while it is the opposite for poor people. To solve this, the government must implement progressive taxation. Here, the richer you are, the higher the proportion of tax you will be paying and vice-versa. This way you are getting from rich people who can afford it and not harm poor people. It is a win-win.
There are many services that are controlled by the government such as parks, zoos etc. When you use them, you have to pay a fee. Normally this fee is minimal as they are trying to encourage more people to use them. But in order to increase revenue, they could the raise the level of these fees. It is entirely possible to raise it without adversely affecting people. This will be a boost to its revenue.
7. Public Contribution
This is a rather unusual method of raising but it nonetheless can prove to be effective. Supposing there is a project to be done which will be beneficial to a large number of people, you could ask other people under the government’s jurisdiction to contribute towards it. There could be a minimum amount that could be set. And if they want to give more, it will always be welcome. This will be possible only if you can convince the people that the project will be done otherwise they won’t trust you. But if it succeeds, it is a great way of raising money without spending too much.