Government Income
Excise Duty Tis is oſten referred to as sin, or luxury tax – the reason being that most countries impose an excise on commodities such as tobacco and alcohol, but also on petrol, base oil, cool drinks, cosmetics, luxury jewellery and most recently in SA, on boats as well. Tis tax is not levied as ad valorem, but rather per weight, number of volume. Tis makes it easy to monitor and collect, but in times of high inflation the government loses out because, when the prices rise, and consumption rises the government does not get the benefit of taxing the higher price. Te tax on petrol is not seen as a “sin” or “luxury” tax, but rather as taxation for the benefit of the user – the revenue is supposed to go towards road construction and maintenance. It should be clear that many items which are imported are subject to both import duty and excise duty which can make imported goods very expensive, e.g. motor cars (importing a car from overseas means having to pay some 36% duty. Tis is in addition to the VAT which is another 14%. Tis means, inpractical terms, that even when living overseas in, say Canada, and earning (in units) about two-thirds less salary, one pays almost ten times less for a motor car). As mentione before it should the aim of every country to import as little as possible and to export as much as possible.
4. User Charges, Consumer Tariffs and Nominal Levies
User Charges Money is charged for the use of certain products and services. Module 1 clearly outlines quasi- collective or public services – fire protection, preventive health services, and education services. Te reason the government is willing to partly fund these is because of externalities (fully explained in Module 1). Te fixed cost is usually funded by tax; the operational cost such as medical services provided, drugs prescribed, etc. becomes the basis for the user charge.
Consumer Tariffs Te name suggests that people will consume a commodity and that unlike collective services, these goods are exhaustible and need to be replenished. Two of the most common examples are the supply of water (see Module 1, p.14 Particular Services), and the supply of electricity. Tere is a direct quid pro quo. While other services (collective and quasi-collective/public) are financed from taxes, particular goods and services should be financed solely from the tariff itself. It does happen, though, that there are operational losses, and the government is then forced to subsidise the consumers.
Nominal Levies Tere are levies and charges which do not fit into the category of tariffs or user charges, but which yield considerable revenue for government. In most cases a nominal levy is paid for the privilege granted by the government – examples might be mining rights, and licenses of various kinds. Licenses – local government enjoys revenue from dog licenses (for the right to own a dog), and also for the right to trade within a certain area.
Sundry revenue – revenue which does not fit into the category of levies or charges is called sundry revenue. An example might be library membership fees and fines for not returning books. A large source of income, especially for local government, is fines – especially traffic fines. Te revenue is in some cases so large, that local governments actually budget for them – this forces traffic officers to concentrate more on the collection of fines, than on their primary function of protection and promotion of road- safety.
Another example of sundry revenue is rent for use of government owned properties such as sporting facilities, etc. – the fee might not cover the full cost of operation, which means that the general taxpayer who might not use the facility subsidises the cost.
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