Non-Tax Revenue

We believe that governments should maximize their revenue from non-tax sources and should reduce their reliance on tax revenue. Here we will give a classification of several types of non-tax revenue.

Class A

  • development aid
  • tributes
  • loans

Class B

  • rent of public property
  • dividend from state-owned enterprises
  • royalties

Class C

  • fines
  • asset forfeiture
  • (license) fees

Class D

  • sale of government property
  • bona vacantia
  • voluntary contributions

As one might have guessed there is a logic behind this classification.

Class A revenues only shifts the tax burden on others: development aid and tributes shift the tax burden to citizens of other states, borrowing shifts the tax burden to the future. So class A revenue cannot be used to reduce the overall need for taxation.

Class B involves revenue generated by the management of government assets. This class provides structural revenue for the state without having to shift the tax burden to anyone at all.

Class C is revenue generated by the regulation of human behavior. Fines are imposed on criminals and asset forfeiture serves to deprive criminals from their ill-gotten gains. We believe that this revenue should primarily be used to pay compensation to the victims of crime.

License fees should be used to cover the administrative costs of processing applications for licenses. This would prevent governments from introducing all kind of nonsense licences.

Class D includes accidental revenue. The sale of old computers, office furniture or police cars, will only cover a fraction of the replacement of these goods. Though this reduces the total need for funding, it could not serve as a structural source of revenue.

Bona vacantia is property without an owners, usually as the result of someone dying without heirs. Since this kind of revenue is hard to predict, it is also unsuitable for fiscal policy.

Ideally governments could be entirely be funded though voluntary donations from the public. However, given the large amount of tax avoidance and evasion this does not seem to be a realistic proposition.

8 thoughts on “Non-Tax Revenue”

    1. You should know that (income) primarily hits the middle class: the poor have no money to pay tax and the rich can efford to pay tax advisors to avoid taxes.

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