The Generation of Income and the Expenditure Within a State
License Fees • Television; • Motor vehicles.
Penalties and Bail Money • Fines for criminal offences; • Bail money – paid by alleged criminals to be released while on trial.
Special funds and accounts, they are amongst others • National Road Fund; • Central Energy Fund; • State Pension Fund; • National Housing Fund.
Allocation and Sharing of Revenue (Income)
How a central government allocates (gives out) funds; to what extent it does so and at what level it awards this allocation will depend upon its ideology and style of government. A country which has a centralised style of governing will retain as much taxing authority as possible. In a federal system the central government will encourage a delegation of taxing authority and will allow the provincial and local government to both tax and provide services. In fact, in a pure federal system such as America, the central government is only too pleased to have regional authorities decide whom to tax, at what level and at what rate, and exactly which services to provide.
The policy which is finally decided upon should ideally benefit all the citizens – a policy which does not encourage effective and efficient management of funds, allocation of revenue and fair distribution of income is of no value to any country.
Whatever the intergovernmental relations, the legislative authority needs to consider several factors before delegation and allocation can take place; they are listed and explained below as cited in Gildenhuys (1993:189): • Determination of financial needs; • Determination of financial capacity; • The division of sources of income; • Revenue sharing.
Determination of Financial Needs The first step in the distribution process is to determine the financial needs of the community. The financial needs of a government are always larger than the capacity to pay for them – insatiable demands versus limited funding. There exist a number of criteria used to determine these needs; they are, according to Gildenhuys (1993:189): • Ideal criterion: the desirable minimum levels of service is determined as well as the cost to supply such a service minimum;
• Average criterion: according to which the financial need is measured in terms of rendering an average standard of service.
In the second case a national per capita (per head) expenditure amount for the country is calculated and then compared to the average per capita expenditure amount of the government department concerned in order to determine this department’s financial need. The nature (kind or type) and extent (how much, or degree) of public services are the main factors determining the financial needs of any government.
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