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Non-tax revenue or non-tax receipts are government revenue not generated from taxes. For example - bond issues and profits of state-owned companies.
The characterization of non-tax revenues and also its main subcategories detailed below align with the concepts stated in the 2014 IMF Government Finance Statistics Manual (GFSM). Non-tax revenue involve improvements in government total assets coming from purchases beyond tax receipts. These incomes do not include funds created from government loan payments or borrowing, neither profits from sales of capital assets, stocks, land, intangible assets, or private donations.
Non-tax revenues are made up of the following components:
1) Grants
According to the GFSM 2014, grants represent transfers obtained by government entities from non-resident governmental bodies or worldwide companies without any reciprocatory products services or assets. Normally, grants are in cash, yet they can likewise be offered in the kind of goods and services. These transfers are non-refundable and volutary. Grants include reparations and donations marked for specific projects or programs. It's essential to keep in mind that the term “grants” does not consist of transfers to or from non-governmental entities and also omits inter-governmental transfers. Additionally, when one government accumulates funds in behalf of an additional in a company capacity, it should not be identified as a grant obtained by the recipient governmen but instead as direct revenue invoice.
2) Property income
This category involves government income stemmed from the ownership of property, enterprises, financial assets, or intangible assets when government devices designate them to other entities. Revenue from the sale of non-financial assets, like land sales, is not recorded since such deals do not enhance net worth. In a similar way, repayments on loans plus loan disbursements are not taken into consideration revenue. Property income can materialize as dividends, interest, land rents, royalties, or withdrawals from entrepreneurial earnings. The key elements consist of:
Interest and dividends: Interest stands for the earnings gotten by a government system from an financial asset when it's made available to one more institutional unit. Dividends represent the earnings acquired from supplying equity funds to a firm, whether local or non-resident.
Rents or royalties: Rent signifies the earnings stemmed from sources like land, mining, or oil resources when a government unit leases them to private or international entities. These rents emerge from lease contracts enabling the lessee to exploit and extract a natural resource in exchange for payment. Payments for exploration rights are likewise categorized as rental fee. It's crucial to differentiate rents from various other payments governments obtain worrying the exploitation of subsoil as well as comparable assets, such as severance taxes, organization licenses or various other taxes (e.g., value-added tax, excise duties, taxes on exports, etc.). Additionally, rents should not be perplexed with revenues from leasing buildings and equipment, which are considered sales of products and services.
Other property income: This classification includes revenue acquired by a government unit when it allots funds to quasi-corporations (unincorporated enterprises that work out some features of corporations, however have actually not been granted separate legal personality by statute). Conceptually, this income resource mirrors dividends from firms, however quasi-corporations, by definition, cannot distribute dividends in dividend form. “Other property income” likewise covers retained or reinvested earnings, specifically the part of distributable revenue not paid as dividends but preserved by the corporation or quasi-corporation in foreign investments. Additionally, it includes property income from investment income disbursements and unidentified property income.
3) Sales of goods and services
Revenues under the classification “sales of goods and services” is usually reported on a gross basis without deduction of costs. Considering that these costs can stand for a substantial proportion of revenues, they cannot be considered in total as funds available for governments to finance their basic tasks. This contrasts with tax revenues, where the collection costs are generally a little percentage of revenues. This distinction suggests that it might not be significant to sum tax and non-tax revenues as component of a computation of normally available funds. The earnings of sales of nonfinancial assets such as the sale of buildings or lands are not categorized as incomes given that their disposal does not enhance the net worth.
Sales of goods and services contain:
• Sales by market establishments (establishment that charges economically considerable prices). • Administrative fees for services (i.e. charges for drivers’ licences, passports, visas, court fees, harbour fees, etc). • Administrative fees that are sales of services connected with a regulatory function of government (such as charges for the inspection of premises prior to deliver a business permit) plus considered to be symmetrical to the cost of producing the service are included in this group. • Sales by nonmarket establishments such as charges at government healthcare facilities, tuition fees at government schools and admission charges to museums plus parks. • Leasing of buildings and equipment.
4) Fines, penalties and forfeits
The GFSM 2014 states “Fines and penalties are compulsory transfers imposed by courts of law or bodies for violations of laws or administrative rules. Out-of-court agreements are also included (...). Forfeits are amounts deposited with a general government unit pending a legal or administrative proceeding, and that will be transferred to the unit upon resolution”. As an example, traffic penalties are included. Penalties and fines billed on overdue taxes or charges enforced for the evasion of tax obligations need to be recorded in this group and not as taxes. Nonetheless, if it is not feasible to divide the quantities paid in taxes and penalties, the entire quantity ought to be identified under the tax to which the penalty associates.
5) Other social contributions
This group consists of the real and imputed payments to social insurance schemes run by governments as employers on behalf of their staff members that do not develop a future defined obligation. This classification likewise consists of the amount of the total volunteer contributions (the IMF consists of these payments as component of their total of social security contributions).
6) Miscellaneous and unidentified revenue
This group includes unidentified non-tax revenues or those that do not suit any one of the various other classifications noted above. It consists of profits such as gifts as well as transfers from individuals, private non-profit establishments, nongovernmental foundations, firms, or sources other than governments and global organisations. Major non-recurrent payments receivable in compensation for extensive damages or serious injuries not covered by insurance policies are also included, such as payments of compensation for damages caused by major explosions; oil spillages; or payments receivable for damage to property other than payments from an insurance settlement.
Examples
- Aid from another level of government (intragovernmental aid); in the United States, federal grants may be considered non-tax revenue for the receiving states, and equalization payments
- Aid from abroad (foreign aid)
- Tribute or indemnities paid by a weaker state to a stronger one, often as a condition of peace after suffering military defeat. The war reparations paid by the defeated Central Powers after the First World War offer a well-known example.
- Loans, or other borrowing, from monetary funds and/or other governments
- Revenue from investment funds, sovereign wealth funds, or endowments,
- Revenue from sales of state-owned assets
- Revenue from profitable state-owned enterprises
- Rents, concessions, and royalties from private firms (often from leases for developing natural resources on public land)
- Fines collected and assets forfeited as a penalty. Examples include parking fines, court costs levied on criminal offenders, and civil forfeiture
- Fees for the granting regulates or issuance of permits or licenses. Examples include vehicle registration plate permits, vehicle registration fees, watercraft registration fees, building fees, driver's licenses, hunting and fishing licenses, fees for professional licensing, fees for visas or passports, fees for demolition, rezoning, and land grading (which causes silt), and sometimes for increasing stormwater runoff, destroying native vegetation, and cutting-down healthy trees.
- User fees collected in exchange for the use of many public services and facilities. Tolls charged for the use of toll roads are an example
- Donations and voluntary contributions to the state
The volatility of non-tax revenue
Non-tax revenues can fluctuate significantly from one year to another. Indeed, their value is correlated with changing economic circumstances, repayments and interest on loans may be renegotiated, a record fine in the field of competition can significantly vary the profits of fines and penalties. Moreover, some years are marked by exceptional events: for example, in France in 2012, the sale of "4G" radio frequencies resulted in the collection of nearly €1.3 billion in non-tax revenues.
References
- https://www.performance-publique.budget.gouv.fr/budget-comptes-etat/budget-etat/approfondir/recettes-etat/recettes-non-fiscales#.XpszoNMzZ0t
- OECD (2020), “Interpretative Guide to non-tax revenue in Revenue Statistics in Asian and Pacific Economies”, in Revenue Statistics in Asian and Pacific Economies 2020, OECD Publishing, Paris.