10 C E N T E R F O R WO M E N ' S G LO B A L L E A D E R S H I P III. Government Revenue Governments receive revenue from many sources: including, taxation, royalties paid for utilization of natural resources, and profits from public enterprises. Here we focus on taxation as this is typically the most important way in which governments mobilize domestic resources. The report considers international development assistance, including official development assistance (ODA), in the subsequent section. KEY QUESTIONS: ■■ What institutional and distributive issues should be taken into account when determining tax policy? How does the level and composition of taxes (e.g., income tax, value-added tax (VAT), trade taxes, property taxes) affect the ‘maximum available resources’ and other human rights obligations? ■■ How should tax policy respond to the ‘booms’ and ‘busts’ of economies in order to reduce the negative consequences of the kind of drastic revenue short falls we currently see happening around the world? ■■ Has the government considered introducing financial transaction taxes, which are low level taxes on the purchase of financial assets such as stocks, bonds, futures contracts, and currencies, which could potentially raise substantial resources for the fulfillment of human rights? ■■ Is there a real danger that higher taxes will reduce the resources available for realizing economic and social rights through their impact on non-state actors, such as businesses (i.e., are there circumstances under which tax policy reduces future growth and employment)? ■■ To what extent is ineffective revenue collection a problem and how can it be addressed? The process of mobilizing tax revenue and using those resources to provide public goods, social services, and social protections is widely accepted as a central responsibility of a well-functioning government. Nevertheless, many economists and business interests refer to ‘tax burdens’ and ‘distortions’ caused by tax policy, using as a benchmark an economy functioning without taxes. In our view this is not an appropriate benchmark, and we argue for referring instead to ‘tax contributions’ and tax ‘guidance.’ Indicators of Tax Revenue Mobilization To analyze the adequacy of tax mobilization, it is useful to refer to the tax-toGDP ratio, sometimes known as the effective tax rate. Tax effort is another useful indicator which measures actual tax revenue compared to potential tax revenues. Potential tax revenues are defined in different ways—one approach is to define potential revenues as the total value of tax revenue which would be raised under the prevailing tax code if 100 percent of taxes were actually collected. Tax effort can be used to assess how much additional revenue could be mobilized without changing any tax laws if the effectiveness of collection were improved.