The modern states have to perform multifarious duties for promoting the welfare of their citizens. For the performance of these functions, money is needed. Every government therefore tries to meet its annual expenditures from taxes and from sources other than taxation. The revenue of the state can be classified under the following heads.
1. Revenue from Private Income: A government derives revenue from citizens by taxation and from other non-tax resources such as fees, prices, special assessments, rates etc.
2. Irregular Revenue: Under this heading, we include all items such as gifts, penalties, war indemnities etc.
3. Revenue from State Ownership: A government also obtains incomes from the different assets which it owns. For instance government receives money from state buildings, crown lands, and other productive enterprises such as railways, postal service canals etc. We have given classification of public revenue under above mentioned heads; let us make clear distinction between all these various types of taxation.
Kinds of Taxation:
1. Tax: A tax is compulsory contribution to the public authority to cover the cost of services rendered by state for the general benefit of its people.
2. Fee: A fee is a payment made by the citizens of the country to state for obtaining a definite service in return. Fee like taxes is not compulsory contribution. It is only paid by those persons who enjoy the special benefit of the services rendered by the state. The amount of the fee is generally less than the cost of rendering service. For instance student’s tuition fee is not equal to the cost of service rendered to him. Some part the total cost is covered by fees and some by taxes.
3. Price: Price is like fees, it is also payment made by persons for obtaining a definite service in return. The difference between a fee and a price is that public purpose is more prominent in fee than price. Price is a voluntary payment with a quid pro quo. When a government runs a business, it receives revenue. For instance government sells timber from its mines, it also charges fare on state buses or from railways. The total revenue which the government receives from such services of business character is called price in economics.
4. Special Assessment: Special assessment is a compulsory contribution made by the owner of a property for some benefit conferred to his property by the public authority. We can say that special assessment is a compulsory payment for improvement. For instance a corporation provides water, electricity, drainage, paves streets, lays out parks etc in a particular locality of the city. The value of all the property situated in the locality will go up. The corporation has every right to share a part of this unearned increment by taxing the owners of the property who have benefited from the improvement. This tax which is levied in respect of improvement made to the property by the public authority is called special assessment. Special assessment is more or less in proportion to the benefits enjoyed by the owners of the immoveable property.
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