Non-Tax Revenue Generation, Leveraging Digital


By Dr. Jaijit Bhattacharya

Governments have been focusing on Tax as a primary source of fund generation. Because of the nature of taxation, there are severe issues in the two primary kind of taxes – direct taxes and indirect taxes. Basic economics shows that indirect taxation distorts the economy and how to direct taxation is discriminatory in nature, as many are outside the purview of direct taxes.

However, as we move into an era of ever-expanding demands on the government to deliver, the pressures for fund generation has been spiralling up. This has been accentuated by voters’ comparisons between the private sector’s ability to deliver personalized services to a large number of people versus the Government’s inability to do the same.

An interesting outcome of such a dynamics is the ability to transform the government from a primarily Tax Oriented Government (TOG) to a Service-Oriented Government (SOA), and in the process, unlock very significant economic values that are trapped in various kinds of physical and non-physical assets that are owned by the government.

Governments are owning assets of extremely high economic value, whose value has not been unlocked. These assets are in the form of tangible and intangible assets which are locked because of reasons of policy, process or governance. Interestingly, much of this unlocking of economic value can be done through leveraging digital technologies.

The source of the value unlocking comes from (a) Cost rationalization and (b) unlocking of tangible and intangible assets.

Although Cost rationalization appears to be a straight forward exercise, however, for the government, it is a highly complex exercise that needs to balance the social objectives with the cost rationalization. Typically, cost rationalization opportunities are realized where the focus of an initiative is on the output and not on the outcome. For example, if instead of focusing on the number of students educated on computers, the focus is on the number of computers installed in schools, the focus and the expenditure shifts from educating students to setting up of expensive and often unnecessarily over-engineered labs. The same can be seen in many social initiatives where instead of focusing on social outcomes such as a reduction in maternal mortality, infant mortality etc, the focus is on setting up of sub-standard clinics which do not necessarily improve the health of disadvantaged sections of the society.

Similarly, there are enormous tangible and intangible assets owned by the government whose value can be unlocked through appropriate policy interventions. For example, the government is a monopolistic owner of significant data that has enormous value. The ownership of all vehicle data implies that government can actually setup portals to allow citizens to find buyers and sellers of vehicles online, in addition to finding the cheapest loans, while completing the entire transaction online without the need for citizens to visit the traffic office for transfer of ownership of the vehicle. Given that this gives extra value to the citizens who currently go through brokers and pay them 1-2% of the total transaction value as brokerage, the government would be within rights to charge a similar amount from the citizens.

And if the government cannot set up this entire system on its own, the government can open op access to this data through Open Digital Ecosystems so that the private sector can leverage the data for a fee to the government.

Thus the government will move from a Tax Oriented Administration TOA) to the Service-Oriented Administration (SOA). This is part of a larger process of moving to Next Generation Government (NGG). In my book, “eGov 2.0, Policies, Processes and Technologies”, Next Generation Governance is defined as an evolutionary step towards a more efficient, inclusive and participative government through adoption of a set of new trends in business models, operational models, financial models and technological models for achieving Outcome based Governance.

There are other assets such as real estate under flyovers in the cities, which can be leased to car companies to showcase their vehicles in a glass enclosure. This would not only ensure revenues for the government but would also ensure that the place is not taken up by squatters who can potentially indulge in anti-social activities. Similarly, impact zones can be developed where-in the value of the impact zones go up significantly due to the development initiatives.

Economic value is trapped in assets such as spaces, impact zones, monopolistic data and ability to create wealth by marrying appropriate policy with capital, in a manner that private sector is not in a position to do. Unlocking the economic values through a combination of appropriate policies and development of a Service Oriented Administration will unlock the economic values of these Government-owned assets, leading to the creation of very significant non-Tax revenues.

The economy can be expanded significantly by unlocking of such tangible and non-tangible economic assets by the government. Governments need to take up detailed exercise to identify and realize the values that are buried in the governance systems and assets.