Tax revenue

Taxation
An aspect of fiscal policy
Policies Government revenue Tax revenue Non-tax revenue Tax law Tax bracket Tax threshold Exemption Credit Deduction Tax shift Tax cut Tax holiday Tax advantage Tax incentive Tax reform Tax harmonization Tax competition Double taxation Representation Unions Medical savings account Tax, tariff and trade
Economics General Theory Price effect Excess burden Tax incidence Laffer curve Optimal tax Theory Optimal capital income taxation Distribution of Tax Tax rate Flat Progressive Regressive Proportional
Collection Revenue service Revenue stamp Tax assessment Taxable income Tax lien Tax refund Tax shield Tax residence Tax preparation Tax investigation Tax shelter Private tax collection Tax farming
Noncompliance General Tax avoidance Tax evasion Tax resistance Tax shelter Smuggling Black market Unreported employment Corporate Tax inversion Transfer mispricing Base erosion and profit shifting (BEPS) Double Irish Dutch Sandwich Single Malt CAIA/Green Jersey Locations Tax havens Corporate tax havens Offshore financial centres (OFCs) Offshore magic circle Conduit and Sink OFCs Financial centres Financial Secrecy Index Major examples Apple €13 billion fine Ireland as a tax haven Leprechaun economics Liechtenstein tax affair Luxembourg Leaks Offshore Leaks Paradise Papers Panama Papers Swiss Leaks United States as a tax haven Panama as a tax haven
Types Direct Indirect Per unit Ad valorem In rem Capital gains Carbon Consumption Dividend Ecotax Excise Fuel Georgist Gift Gross receipts Income Inheritance (estate) Land value Payroll Pigovian Property Sales Sin Single Stamp Steering Turnover Value-added (VAT) Corporate profit Excess profits Windfall profits Negative (income) Wealth
International Financial transaction tax Currency transaction tax European Union Common Consolidated Corporate Tax Base (CCCTB) Tobin tax Spahn tax Tax equalization Tax treaty Permanent establishment Transfer pricing European Union FTT Foreign revenue rule
Trade Custom Duty Tariff Import Export Tariff war Free trade Free trade zone Trade agreement ATA Carnet
Research Academic Mihir A. Desai Dhammika Dharmapala James R. Hines Jr. Ronen Palan Joel Slemrod Gabriel Zucman Advocacy groups Tax Justice Network (TJN) Institute on Taxation and Economic Policy (ITEP) Oxfam (UK) Tax Foundation (US) Tax Policy Center (US)
Religious Church tax Eight per thousand Teind Tithe Fiscus Judaicus Leibzoll Temple tax Tolerance tax Jizya Kharaj Khums Nisab Zakat
By country All Countries List of countries by tax rates Tax revenues as % of GDP Tax rates in Europe Individual Countries Albania Algeria Argentina Australia Azerbaijan Bangladesh Bhutan Brazil Bulgaria BVI Canada China Colombia Croatia Denmark Finland France Germany Greece Hong Kong Iceland India Indonesia Iran Ireland Israel Italy Japan Kazakhstan Lithuania Malta Morocco Namibia Netherlands New Zealand Norway Pakistan Palestine Peru Philippines Poland Russia Singapore South Africa Sri Lanka Sweden Switzerland Taiwan Tanzania United Kingdom United States Uruguay

Public finance
Policies Agricultural Economic Energy Industrial Investment Social Trade Fiscal Monetary Policy mix
Fiscal policy Budget policy Debt internal Deficit / surplus Finance ministry Fiscal union Revenue Spending deficit Tax
Monetary policy Bank reserves requirements Discount window Gold reserves Interest rate Monetary authority central bank currency board Monetary base Monetary (currency) union Money supply
Trade policy Balance of trade Free trade Gains from trade Non-tariff barrier Protectionism Tariff Trade bloc Trade creation Trade diversion Trade / commerce ministry
Revenue Spending Non-tax revenue Tax revenue Discretionary spending Mandatory spending
Optimum Balanced budget Economic growth Price stability
Reform Fiscal adjustment Monetary reform
Portal

Tax revenue is the income that is gained by governments through taxation. Taxation is the primary source of income for a state. Revenue may be extracted from sources such as individuals, public enterprises, trade, royalties on natural resources and/or foreign aid. An inefficient collection of taxes is greater in countries characterized by poverty, a large agricultural sector and large amounts of foreign aid.

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 a third party licensed to collect tax which they themselves will use. For example, in the UK, the Driver and Vehicle Licensing Agency (DVLA) collects vehicle excise duty, which is then passed onto HM Treasury.

Tax revenues on purchases come in two forms: "tax" itself is a percentage of the price added to the purchase (such as sales tax in U.S. states, or VAT in the UK), while "duties" are a fixed amount added to the purchase price (e.g., for 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.

Taxation and state capacity

Taxation was a key task in any country as it advances state capacity and accountability. Charles Tilly identifies taxation as a form of extraction that allows the state to execute its primary functions: public policies (education, infrastructures, health care), state making, and protection. Taxation became indispensable in western Europe, when countries needed to fund wars in order to survive. This European model was later exported all around the world. Today, the level of taxation is used as an indicator of state capacity. Developed countries raise more taxes and therefore are able to provide better services. At the same time, the high taxation forces them to become accountable with their citizens, which strengthens the democracy.

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 price-elastic goods, an increase in tax rate or duty would lead to a fall in tax revenue.

Laffer curve

The Laffer curve theorises that, even for 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 cost limit on what can actually be afforded
• The existence of expensive substitutes (which become less expensive)
• An increase in tax evasion (e.g., through the black market)
• The shrinking of business caused by increased taxes

The Laffer curve, however, is not universally accepted; Paul Krugman referred to it as "junk economics".

Revenue administration

Public sector

A limiting factor in determining the government budget is the capacity to tax. Per capita income (PCI) 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   total 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:

• Manage and invest financial assets prudently
• Administer tax and revenue programs fairly and efficiently
• Manage risk associated with loss of public assets
• Regulate capital expenditure

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 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 U.S. 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 2,000,000 square feet (190,000 m²) of new industrial property or 1,000,000 square feet (93,000 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 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.

See also

• List of countries by tax revenue as percentage of GDP