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The government of a country gets income from two sources, namely, public revenue and public borrowing. Public revenue consists of money that the government is under no obligation to return to every individual from whom it is obtained. Public borrowing, on the contrary, carries with it the obligation on the part of the government to pay money back to the persons from whom it has been obtained. In this chapter, public sector revenue sources, public sector borrowings, intergovernmental transfers and revenue administration will be discussed.
The Financial management system (FMS) distinguishes between two main types of government revenue: own source revenue and transfers from other government sub-sectors.
Own source revenue is defined as revenue raised by a government from its own imposition of a tax, a license, a fee or any other charge. Personal income tax, consumption taxes and contributions to social insurance plans are all part of that group. On the other hand, a transfer from another government sub-sector is an amount of money received directly from another party without a direct impost by the receiving party. Transfer payments fall into two categories-general purpose, where no restriction is placed on their use, and specific purpose, where certain conditions must be fulfilled in order to qualify for the transfer which govern the use of the transfer. Equalization payments are classified in the general transfer category while provincial government transfers to assist municipalities in the operation and upgrade of the local road and bridge systems are classified in the specific transfer category.
Investment income – This category is divided into four sub-categories: natural resource royalties, remitted trading profits, interest income and other investment income.
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