Restrictions on government revenue may be imposed on governments for several reasons. First, establishing a revenue ceiling for governments is a guaranteed way to ensure governments operate efficiently (Dollery, 2006, p. 32).
Obviously, imposing a revenue restriction on governments, limits their revenue and resources, and therefore, almost by default, they will be forced to use effectively the limited revenue in providing crucial services to the citizens. Governments which do not have a revenue ceiling are more likely to misuse their funds, when compared to governments that have a revenue restriction.
This is true because such governments are likely to go on a spending spree, just because they have the money to do so. Introducing restrictions on government revenue therefore ensures that, government spending is checked. For instance, in Australia, the NSW legislation was introduced to limit government revenue with the sole aim of improving government efficiencies (Dollery, 2006, p. 32).
Another crucial purpose of imposing restrictions on government revenue is protecting the citizens from the excesses of government (Lee, Johnson and Joyce, 2008). Here, protection may be accorded to individuals or businesses. For instance, the government may impose unethical taxes on its citizens to finance its projects by ignoring the economic circumstances of the time.
Often, this is unethical. It is therefore crucial to impose restrictions on government revenue to ensure there is a good relationship between the government and its citizens.
This is also the reason several states peg their restrictions on their gross domestic products (GDP) because the GDP is a measure of the economic performance of a state. If the GDP is high, the ceiling on government revenue may be raised. This is an ethical way of undertaking or financing government business and ensuring the welfare of the citizenry is taken care of.
Alternatives which may be pursued by governments when faced with such budgetary restrictions are often two-fold. One, governments may embark on lobbying all relevant stakeholders to lift such strict restrictions. Lobbying is a more direct way of handling the situation, but its success mainly depends on the justification given by the governments.
Secondly, governments may decide to increase their revenue base so that they do not seem to be highly taxing one sector of the economy. This is an indirect way of handling the situation. It is also a complementary strategy to the lobbying strategy.
The formulation of new policies is often a tricky issue, especially when it comes to implementing them. Due to this fact, it is crucial for policy makers to include all stakeholders while formulating new policies. The community is one such stakeholder. As a result, we cannot underestimate the importance of aligning revenue policies with community values.
This is because aligning revenue policies with community values is crucial in realizing a general sense of acceptability to the revenue policies (Besser, 2000, p. 2). Revenue policies that clash with community values are likely to face resistance from the community, and in extreme cases, they may be repulsed, never to be implemented.
Also, aligning revenue policies with community values is an important component of guaranteed reciprocation of the community cooperation to the policy makers. This act is bound to improve compliance among the community members and more importantly, compliance from businesses operating within the community.
Somewhat, aligning revenue policies with community values complements the core purpose of formulating the policies in the first place. This core purpose is to improve government revenue. If such policies are not complied with, the entire process would be futile.
Besser, T. (2000). The Importance of Community Values in Small Business Strategy Formation: Evidence from Rural Iowa. Web.
Dollery, B. (2006). Australian Local Government Economics. Sydney: UNSW Press.
Lee, R.D., Johnson, R. W., & Joyce, P.G. (2008). Public Budgeting Systems. Sudbury, MA: Jones and Bartlett.