Sources and Classifications of Government Revenue

Government revenue refers to the funds collected by the government to

finance its activities and provide public goods and services. These revenues
are crucial for the functioning of a government and play a significant role in
shaping the livelihood of ordinary citizens. In Zimbabwe, like in many other
countries, government revenue is derived from various sources and can be
classified into different categories.

1. Tax Revenue:
Tax revenue is the most significant source of government income in
Zimbabwe. Taxes are compulsory payments imposed by the government on
individuals, businesses, and other entities. There are several types of taxes that
contribute to government revenue:

- Income Tax: This tax is levied on individuals and businesses based on their
income or profits. In Zimbabwe, individual income tax rates range from 0% to
40%, depending on the income level.
- Value Added Tax (VAT): VAT is a consumption tax imposed on the value
added at each stage of production and distribution. In Zimbabwe, the
standard VAT rate is 15%.
- Customs Duties: Customs duties are taxes imposed on imported goods.
They are designed to protect domestic industries and generate revenue for
the government.
- Payroll Taxes: These taxes are levied on employers and employees based on
wages and salaries. They include social security contributions, pension fund
contributions, and other payroll-related taxes.
- Property Taxes: Property taxes are imposed on real estate properties such
as land, buildings, and houses. They contribute to local government revenue.

2. Non-Tax Revenue:
Non-tax revenue refers to income generated by the government through
sources other than taxes. In Zimbabwe, some significant non-tax revenue
sources include:

- Fees and Charges: Governments collect fees for various services provided to
individuals or businesses, such as licensing fees, registration fees, and user
charges for public utilities.
- Royalties: Royalties are payments made to the government for the use of
natural resources, such as minerals, oil, and gas.
- Dividends and Profits: Government-owned enterprises contribute to
government revenue through dividends and profits generated from their
operations.
- Grants and Donor Funding: Zimbabwe receives financial assistance from
international organizations, foreign governments, and non-governmental
organizations in the form of grants and donations. These funds are used to
support various development projects.

3. Borrowing:
Governments may also borrow money to finance their activities and cover
budget deficits. Borrowing can take the form of domestic loans or external
loans from international financial institutions or other countries. However,
excessive borrowing can lead to debt burdens and negatively impact a
country's economy in the long run.

Impact on the Livelihood of Ordinary Zimbabweans

The government's revenue collection and management have a direct impact

on the livelihood of ordinary Zimbabweans. Here are some key ways in which
government revenue affects citizens:

1. Provision of Public Goods and Services:

Government revenue is essential for providing public goods and services that
are crucial for citizens' well-being. This includes infrastructure development
(roads, schools, hospitals), social welfare programs (healthcare, education,
social security), public safety (police, defense), and other essential services.
Adequate funding allows the government to improve the quality of these
services, ensuring that ordinary Zimbabweans have access to basic necessities.

2. Poverty Alleviation and Social Programs:

Government revenue plays a vital role in poverty alleviation efforts and social
programs targeted at vulnerable populations. With sufficient funds, the
government can implement initiatives such as cash transfer programs, food
subsidies, healthcare subsidies, and education grants to uplift the living
standards of ordinary citizens.

3. Economic Development:
Government revenue is crucial for promoting economic development in
Zimbabwe. It enables the government to invest in infrastructure projects that
stimulate economic growth, attract foreign investment, and create
employment opportunities. Additionally, revenue can be used to support small
and medium-sized enterprises (SMEs), provide loans for entrepreneurs, and
fund research and development initiatives.

4. Reducing Inequality:
Government revenue can be used to address income inequality by
implementing progressive tax policies and redistributive measures. By taxing
higher-income individuals and businesses more heavily, the government can
generate funds to support social programs and reduce the wealth gap
between the rich and the poor.

5. Fiscal Stability:
A well-managed government revenue system contributes to fiscal stability,
which is essential for economic growth and stability. Adequate revenue allows
the government to meet its financial obligations, avoid excessive borrowing,
maintain a balanced budget, and manage inflation effectively.

In conclusion, government revenue in Zimbabwe is derived from various

sources such as taxes, non-tax revenue, and borrowing. These funds are crucial
for providing public goods and services, poverty alleviation efforts, economic
development, reducing inequality, and maintaining fiscal stability. The
effective management of government revenue has a direct impact on the
livelihood of ordinary Zimbabweans by ensuring access to essential services,
promoting economic opportunities, and addressing social inequalities.

Top 3 Authoritative Reference Publications or Domain Names Used:

1. World Bank - www.worldbank.org

2. Reserve Bank of Zimbabwe - www.rbz.co.zw
3. Ministry of Finance and Economic Development (Zimbabwe) -
www.zimtreasury.gov.zw

Sources of Government Revenue: 9 Sources |

Economics
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The following points highlight the nine main sources of government
revenue. The sources are: 1. Tax 2. Rates 3. Fees 4. Licence Fee 5.
Surplus of the public sector units 6. Fine and penalties 7. Gifts and
grants 8. Printing of paper money 9. Borrowings.
Source # 1. Tax:
A tax is a compulsory levy imposed by a public authority against
which tax payers cannot claim anything. It is not imposed as a
penalty for only legal offence. The essence of a tax, as distinguished
from other charges by the government, is the absence of a direct
quid pro quo (i.e., exchange of favour) between the tax payer and
the public authority.

Tax has three important features:

(i) It is a compulsory contribution, to the state from the citizen.

Anyone refusing to pay tax is punished under law. Nobody can
object to taxation on the ground that he is not getting the benefit of
certain state services,
ADVERTISEMENTS:

(ii) It is the personal obligation of the individual to pay taxes under

all circumstances,

(iii) There is no direct relationship between benefit and tax

payment.
Source # 2. Rates:

Rates refer to local taxation, i.e., taxation levied by (or for) local
rather than central government. Normally rates are proportional to
the estimated rentable value of business and domestic properties.
Rates are often criticised as being unrelated to income.
Source # 3. Fees:

Fee is a payment to defray the cost of each recurring service

undertaken by the government, primarily in the public interest.
Source # 4. Licence fee:

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A licence fee is paid in those instances in which the government

authority is invoked simply to confer a permission or a privilege.
Source # 5. Surplus of the public sector units:

The government acts like a business- person and the public acts like
its customers. The government may either sell goods or render
services like train, city bus, electricity, transport, posts and
telegraphs, water supply, etc. The government also earns revenue
from the production of commodities like steel, oil, life-saving drugs,
etc.
Source # 6. Fine and penalties:

They are the charges imposed on persons as a punishment for

contravention of a law. The main purpose of these is not to raise
revenue from the public but to force them to follow law and order of
the country.
Source # 7. Gifts and grants:

Gifts are voluntary contribution from private individuals or non-

government donors to the government fund for specific purposes
such as relief fund, defence fund during war or an emergency.
However, this source provides a small portion of government
revenue.
Source # 8. Printing of paper money:

ADVERTISEMENTS:

It is another source of revenue of the government. It is a method of

creating extra resources. This method is normally avoided because
if once this method of financing is started, it becomes difficult to
stop it.
Source # 9. Borrowings:

Borrowings from the public is another source of government

revenue. It includes loans from the public in the form of deposits,
bonds, etc. and also from the foreign agencies and organisations

How it affect liv That is a very interesting question. Sources of government revenue are
the income that the government collects from various sources, such as taxes, social
contributions, grants, and other revenue. The livelihood of ordinary Zimbabweans is
the way they make a living and sustain their basic needs, such as food, water, shelter,
health, and education.

Sources of government revenue can impact the livelihood of ordinary Zimbabweans

in different ways, depending on how the government uses the revenue and how it
affects the economic and social conditions of the country. Some possible impacts are:

 If the government uses the revenue to invest in public goods and services,
such as infrastructure, health, education, and social protection, it can improve
the livelihood of ordinary Zimbabweans by enhancing their access to essential
services, increasing their productivity and income, and reducing their
vulnerability to shocks and risks. For example, according to the World Bank1,
the government of Zimbabwe has used some of its revenue to provide cash
transfers to poor and vulnerable households, which has helped them cope
with the effects of the COVID-19 pandemic and improve their food security
and consumption.
 If the government uses the revenue to promote economic growth and
development, such as by supporting the agricultural sector, diversifying the
economy, and creating jobs, it can improve the livelihood of ordinary
Zimbabweans by expanding their opportunities and choices, and reducing
poverty and inequality. For example, according to the Food and Agriculture
Organization2, the government of Zimbabwe has used some of its revenue to
support smallholder farmers, who form the majority of the rural population,
by providing them with inputs, training, and market linkages, which has
improved their agricultural production and income.
  If the government uses the revenue to maintain peace and stability, such as by
ensuring the rule of law, protecting human rights, and preventing violence and
conflict, it can improve the livelihood of ordinary Zimbabweans by creating a
safe and conducive environment for them to pursue their aspirations and well-
being. For example, according to Oxfam3, the government of Zimbabwe has
used some of its revenue to support peace-building initiatives, such as
dialogue platforms and community-based conflict resolution mechanisms,
which have helped reduce tensions and violence in some of the areas affected
by political and social unrest.
 However, if the government misuses or mismanages the revenue, such as by
engaging in corruption, wastage, or inefficiency, it can harm the livelihood of
ordinary Zimbabweans by depriving them of the benefits of the revenue, and
imposing additional costs and burdens on them. For example, according to the
International Monetary Fund4, the government of Zimbabwe has faced
challenges in managing its fiscal position, resulting in high public debt,
inflation, and currency instability, which have eroded the purchasing power
and savings of ordinary Zimbabweans, and undermined their confidence in the
economy.
 Moreover, if the government imposes excessive or unfair taxes or fees on the
sources of income or livelihood of ordinary Zimbabweans, such as on their
wages, businesses, or assets, it can harm their livelihood by reducing their
disposable income, profitability, and incentives, and increasing their
vulnerability and hardship. For example, according to The Zimbabwean5, some
of the opposition leaders and activists have criticized the government for
imposing heavy taxes and levies on the informal sector, which employs most
of the urban population, and for failing to provide adequate social services
and protection to the poor and marginalized groups.

elihood of zimbabwean