TAPPING THE REVENUE POTENTIAL OF STATES

Abstract

State Governments across the nation need money to finance their expenditure, which includes infrastructure and social services.

There are two major ways for states to finance its expenditure – through taxation and borrowing.

Generally, taxation is deemed preferable to borrowing as debt has to be repaid usually with interest and other debt servicing obligations which can sometimes create additional burden on Government.

In addition, taxation does not have the same limitations as borrowing as a means of financing expenditure.

Putting in place, effective strategies and policies to enhance revenue generation is pivotal for state’s financial autonomy.