Government revenues refer to the income generated by the government. The primary sources of revenue in Latin American and Caribbean (LAC) countries are typically taxes, social contributions and customs duties. In some LAC countries, such as Chile, Colombia, Ecuador and Mexico, a significant share of revenue may also derive from non-tax sources, such as income from state-owned enterprises or royalties on natural resources. Governments use revenues to provide public goods and services and to redistribute income through social benefits and subsidies that in turn can contribute to reducing income inequality, among other purposes. Revenue policies can also be used to encourage socially beneficial activities, for example, through tax breaks for research and development; or to discourage harmful ones for example through taxes on carbon emissions or tobacco use.

Taxes are the primary source of government revenue, playing a crucial role in funding essential public services like healthcare, education, infrastructure and defence. Determining the optimal level of taxation and associated government expenditure is a key question of fiscal policy. Well-designed taxes promote a fair distribution of the financial burden among citizens and contribute to economic stability. However, high taxation levels can discourage investment and hamper economic growth.

Subnational governments are usually responsible for the direct provision of services to the population. However, the extent to which they can collect revenues depends on the distribution of fiscal responsibilities and powers between different levels of government. In countries where subnational governments face constraints on tax collecting, their primary revenue source is often transfers from the central government, typically earmarked in the central budget.

Governments accumulate debt to fund expenditures that exceed their revenues. Government debt can be used to finance both current expenditure and investments. However, debt comes at a cost in the form of interest payments. Therefore, it should be based on an objective assessment of economic capacity gaps, infrastructural development needs, sectoral and social priorities, and a careful evaluation of costs and benefits. The cost of debt, access to capital markets and levels of debt-carrying capacities vary significantly across countries making the impact of debt highly context dependent.

Several countries in Latin America and the Caribbean (LAC) have non-renewable natural resources (NRNRs), mainly hydrocarbons (oil and gas), metals and minerals, which constitute a significant source of public revenue. However, these resources are finite, and the revenue they generate can be highly volatile due to fluctuations in international market prices. The management of NRNRs should also address intergenerational equity: ensuring that exploiting these natural resources will not compromise opportunities for future generations or environmental sustainability.