Sources of Government revenue is a key topic to be discussed to enable us understand where and how government finance all developmental projects as well as the administrative managing of the economy or country. It is the task of government to provide essential services to the community – the maintenance of law and order, building of roads and ports, schools and hospitals and countless other activities necessary to the modern nation. But in order to provide these services, the government must be able to finance them by ensuring that there is a sufficient flow of money into its hands to enable it to pay for the work it must undertake.

Over the past decades, the financial system of central government has become increasingly complex. This is because, not only has the amount of money flowing in and out of the public treasury every year increased tremendously, but it flows in from many more different sources, and it is disbursed for very greater variety of activities.

Revenue constitutes the ordinary income of government, being composed of taxation (the major source of revenue) and earnings (charges raised by government departments for services rendered to the public, rents received for the lease of government lands or building, interest on investments by the government and so on).

This is the inflow of money into the central treasury to finance expenditure.

  • Revenue is an increase in net worth resulting from a transaction. There are four main sources of revenue:
  • Taxes and other compulsory transfer imposed by government units
  • Property income derived from the ownership of assets
  • Sale of goods and services
  • Voluntary transfers received from other units (Grants)

Categorisation of Revenue


  1. Tax Revenue: This forms the dominant share of revenue for many government units and is composed of compulsory transfers to the government sector. Certain compulsory transfers such as fines, penalties, and most social security contributions are excluded from tax revenue. It is further re-categorised into Direct Tax and Indirect Tax.

Tax Revenue sources include the following:

Direct Tax:

Direct Taxes are taxes amount earned by individuals and companies, such as income tax, corporate tax and export duty. It also includes Capital Gains Tax and Gift tax.

Indirect Tax:

This is a tax which is not paid directly by the person who suffers or bears the burden. This type of tax is put on goods and services that are bought and consumed by individuals. They include taxes on general goods and services, excises, customs and other imports, taxes on Export and levies.

2. Non- tax revenue: All other forms of revenue apart from taxes are referred to as Non-tax revenue. Example may include grants, loans, royalties, sale of goods and services, etc.

 Grants are non-compulsory transfers received by government or government units from international organizations and other developed countries like United Kingdom, America, China, France, among others.

Property income, sales of goods and services, fines, penalties and other revenues.


Below are the necessary contributions as captured in the final accounts of the Consolidated Fund:

Taxes on International Transactions 17%
Value Added Tax 28%
Taxes on Personal Income 28%
Taxes on Domestic goods 13%
Grants 5%
Non-tax Revenue 2%
Divestiture 0.0%


Sources of MDAs and MMDAs Revenue

In Ghana, MDAs and MMDAs sources of funds may be grouped into:

  1. Government of Ghana Transfer:

These are transfers from the Consolidated Fund and other government units and include:

  • Central Government – Government of Ghana paid Salaries
  • Ceded Revenue
  • School Feeding Program/HIV/AIDS, etc.
  • DACF Direct transfers – capital development projects

Internally Generated Fund or Revenue:

Generation, management and utilization of IGFs are anchored on several pieces of legislation notably:

  • Articles 174 & 179 of the 1992 Republic Constitution of Ghana
  • MDA (Retention) of Funds Act, Act 753 of 2007;
  • Fees and Charges Miscellaneous Provisions Act, Act 793;
  • Fees and Charges (Amendment) Instrument of 2011; L.I 1986;
  • Part III of the Financial Administration Act, Act 654 of 2003; and
  • Part II of the Financial Administration Regulation of 2004.


  1. Taxes on property
  2. Taxes on goods and services
  3. Property income
  4. Sales of goods and services
  5. Fines, penalties and forfeits.

Ways to improve Internally Generated Funds (IGFs) of Local Government

  1. Recruitment of quality and competent revenue staff
  2. Outsourcing of revenue allocation to competent commission collectors
  3. Setting of revenue targets for revenue collectors
  4. Proper supervision of revenue staff to prevent revenue leakages of records
  5. Rotation of revenue staff to prevent collusion
  6. Accurate data collection to ascertain improved revenue forecast
  7. Education, sensitization and demonstration to general public that revenue collected will be used judiciously for the benefit of the community.
  8. Periodic valuation and revaluation of taxable properties to ensure proper property rate collection.
  9. Motivation of revenue staff including periodic awards to induce productivity.
  10. Improving the monitoring of revenue collection

Causes of failure to meet revenue targets

  1. Corruption on the part of the staff of the revenue collecting Agencies.
  2. Improper records keeping by the Tax Payers
  3. Lack of motivation
  4. Revenue collection agencies not integrated
  5. Difficulty in locating Tax Payers in the informal sector
  6. Lack of logistics for tax collection
  7. Lack of training or revenue collecting officers.

Sources of Government Domestic Borrowing

  1. Issue of securities: – these are government borrowings through the issue of Treasury bills, Notes and Bonds on the domestic market.
  2. Commercial Banks & Financial Institutions: – these are long term loans borrowed from the domestic banking sector and non-banking sector like SSNIT.
  3. Domestic Supplier Credit: – these include the issue of letters of credit to local contractors to enable the contractors’ access credit facilities from banks. The contractors honour their obligations when the government pays them.
  4. Advances from Bank of Ghana: – these are monies advanced to the government by the Bank from their reserves. The advances are refunded when the government has sufficient revenue.


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