CFI 313: PUBLIC FINANCE
LECTURE THREE
SCOPE OF PUBLIC FINANCE
Prof. Dalton divides the scope of public finance into four categories namely:-
3.1 Public income/revenue
This refers to government income collected from various sources. The main sources of public revenue
include taxes, fees, fines and penalties, income from properties, interest from loans repayment, sale of
real assets and royalties. This refers to the income that the government gets from its citizens through
ether;- i) Tax or ii) Non-tax activities.
3.1.1 Tax
Taxation is considered the most important source of public revenue. A tax is a compulsory payment
made to the government without any direct benefit to the individual or firm. Revenue raised through
taxation is used for the benefit of everyone in the society. Taxes can be classified as either direct or
indirect taxes. Examples of direct tax are income tax, corporation tax, capital gains tax, estate
duty/inheritance tax. Examples of indirect tax are custom duties, exercise duties, sales tax and value
added tax. In the year 2013/2014 over 80% of the government revenue was from taxes while only the
under 20 % was from other sources. Income tax contributes the highest percent, followed by customs
and excise, and then VAT.
3.1.2 Non-Tax Revenues
Non-tax revenue include the following;-
3.1.2.1 Surpluses from public corporations
A public corporation is an organization in which the government has a stake in its ownership. Public
corporation normally provides essential services at a fee to the members of the society, e.g. Kenya
Pipeline Company, KBC, KB Standards, etc. When the revenue earned from the supply of these services
is more than the expense incurred, the surplus is paid to the government.
3.1.2.2 Fines and penalties.
The judicial system in the country is made of courts and tribunals which impose fines and penalties on
individuals, firms and corporations that break the laws of the land. The money raised from the fines and
penalties becomes public revenue.
3.1.2.3 Fees
The government renders some direct services to its citizens such as licensing of marriages, issuing birth
certificates, permits, issuing and renewal of driving licenses. For such services a small fee is usually
charged. Such fees are a source of public revenue.
LECTURE THREE
SCOPE OF PUBLIC FINANCE
Prof. Dalton divides the scope of public finance into four categories namely:-
3.1 Public income/revenue
This refers to government income collected from various sources. The main sources of public revenue
include taxes, fees, fines and penalties, income from properties, interest from loans repayment, sale of
real assets and royalties. This refers to the income that the government gets from its citizens through
ether;- i) Tax or ii) Non-tax activities.
3.1.1 Tax
Taxation is considered the most important source of public revenue. A tax is a compulsory payment
made to the government without any direct benefit to the individual or firm. Revenue raised through
taxation is used for the benefit of everyone in the society. Taxes can be classified as either direct or
indirect taxes. Examples of direct tax are income tax, corporation tax, capital gains tax, estate
duty/inheritance tax. Examples of indirect tax are custom duties, exercise duties, sales tax and value
added tax. In the year 2013/2014 over 80% of the government revenue was from taxes while only the
under 20 % was from other sources. Income tax contributes the highest percent, followed by customs
and excise, and then VAT.
3.1.2 Non-Tax Revenues
Non-tax revenue include the following;-
3.1.2.1 Surpluses from public corporations
A public corporation is an organization in which the government has a stake in its ownership. Public
corporation normally provides essential services at a fee to the members of the society, e.g. Kenya
Pipeline Company, KBC, KB Standards, etc. When the revenue earned from the supply of these services
is more than the expense incurred, the surplus is paid to the government.
3.1.2.2 Fines and penalties.
The judicial system in the country is made of courts and tribunals which impose fines and penalties on
individuals, firms and corporations that break the laws of the land. The money raised from the fines and
penalties becomes public revenue.
3.1.2.3 Fees
The government renders some direct services to its citizens such as licensing of marriages, issuing birth
certificates, permits, issuing and renewal of driving licenses. For such services a small fee is usually
charged. Such fees are a source of public revenue.
