(Not sure if this should rather be on the Economics SE)

Inspired by the following paragraph from this article.

Singapore — one of only 11 countries in the world with the coveted AAA sovereign rating — is also in a league of its own. For starters, it does not have any net government debt. This is because there are laws that prevent its government from spending more than what it earns annually unless there are extraordinary circumstances, such as the Covid-19 pandemic. The prudence in financial management has allowed the accumulation of sizeable reserves, on top of what is reported by its central bank, which uses currency strength to hedge against inflation.

The little debt service charges (less than 0.5% of revenue in 2020) Singapore incurs are more than made up for by its investment returns, which make up around one-fifth of its government’s annual income, giving the city state flexibility to remain a low-tax regime.

Singapore is able to lower taxes because their investments are sufficient to provide 20% of the government's revenue. But if one can get 20% of revenue from investments, then it also might be possible to get 100% of the government budget from investments. At that point, one would not need taxes anymore.

Is hitting 100% of revenue from investments actually possible? If yes, has any country ever managed or is attempting to hit that benchmark? If it is not possible, why not?

  • 15
    "Is hitting 100% of revenue from investments actually possible?" Every communistic country on Earth hit that mark, didn't it? Nov 19, 2022 at 15:51
  • 14
    Several of the US states with low tax rates accomplish that by having state-owned property where the state charges ranchers grazing fees and / or state-owned mineral rights where the states charge mining or drilling companies mining or drilling fees. Are those taxes, or are they a return on investment? Nov 19, 2022 at 16:07
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    Related, on Economics.SE: Why does the US government not invest in the stock market? Nov 19, 2022 at 17:06
  • 5
    I think this might be better on Economics stack exchange as the government making that much money from investments is sure to have a large impact on the economy and it could be hard to say if that is a good or bad thing.
    – Joe W
    Nov 19, 2022 at 17:51
  • 8
    @whoisit I beg to disagree. Saudi Arabia and Kuwait are not getting revenues from investments, but from natural resources, this is a different case.
    – FluidCode
    Nov 19, 2022 at 22:35

11 Answers 11


Consider Kuwait. It has "investments" in oil (ie it owns the land where the oil is found, and charges for the right to drill), and from these it makes enough money to not have any personal or corporate tax on Kuwaiti nationals or businesses owned by Kuwaitis. Is the money that the oil companies pay a "tax" or is it payment for a resource?

So in principle, this is possible. It doesn't solve anything though. If the government is acting as a shareholder, and earning dividends from its holdings, that is money which could otherwise be passed onto others, either in the form of dividends to private shareholders, or in wages to workers.

The net effect is still money moving from people to the government, but in a way that is less easy for the government to control (and so is likely to become more regressive). Unless there is a special situation (such as a massive and valuable natural resource like the Kuwaiti oilfields) this is not likely to be an effective way for a government to raise finances.

  • 13
    There is some benefit to not having taxes - you could shut down your tax department and considerably simplify your laws. Likewise you could shutdown "customs" and only inspect cargo for illegal goods. Nov 19, 2022 at 19:15
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    @JonathanReez At the same time, you need to enforce payments on investments, which can be even more complicated if it involves profit-sharing, which ends up being the same type of work as tax enforcement. Maybe it would be less work since there are less entities from which the revenue is coming, but there's also other serious issues like the process of striking investment deals and avoiding the corruption risks in that process, while with taxes the government simply unilaterally imposes the tax code.
    – H Huang
    Nov 20, 2022 at 5:10
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    Of course it's a tax. It's just that oil companies are officially evil, so taxing them is seen as good, and so it's not a "tax" tax. Additionally, there is no sense in which Kuwait invested in something that then produced oil revenue. The oil companies did all of the investing.
    – Boba Fit
    Nov 20, 2022 at 17:54
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    Not that odd. It's a tax paid many places. In Canada, lumber, mineral ores, and oil, all pay similar taxes. fraserinstitute.org/blogs/… Alberta gets many $billions per year, for example.
    – Boba Fit
    Nov 20, 2022 at 18:10
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    I don't think that charging fees for services is what one generally considers "investment return". Investment returns are income you receive merely because you own something (e.g. dividends) or capital gains from selling the investment.
    – Barmar
    Nov 20, 2022 at 22:59

Welcome to the USSR (well, sort of welcome).

In the early 1960s, they actually abolished the income tax for a very wide categories of taxpayers (i.e. direct or indirect government employees, i.e. ~95% of the workforce).

A significant number of these people never owned any property to be taxed either.

The net result was that the vast majority of citizens did not pay any taxes and for those who did it was considered more of a penalty than a significant government income.

Of course, at the same time, the government could get as much as it wants directly from the businesses because, of course, it owned them in the first place.

Calling the USSR-type government ownership of the majority of businesses an "investment" is quite a stretch for a number of reasons, but the end result will be the same as if the government actually was the dominant investor in the economy. You will simply get full political and administrative control over the whole economy.

For those who didn't notice, USSR bankrupted spectacularly.

  • 3
    Did they go "bankrupt"?
    – haxor789
    Nov 22, 2022 at 12:28
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    @haxor789 technically they managed to avoid bankruptcy, but on practical terms USSR collapsed because they could not afford to pay for their food imports and thus were forced to first change their economic system in perestroika (to avoid otherwise imminent bankruptcy) and later accept political concessions (refrain from hard-line intervention to preserve Warsaw Pact and USSR) because it required food aid and/or credit for food imports, being unable to afford them from their revenues.
    – Peteris
    Nov 22, 2022 at 18:07
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    @haxor789 it depends on the definition of "bankruptcy", but in general - yes, they did. They failed to pay wages to the military and the police (they called it "militia", but it doesn't matter) so the government failed to control the member states (they left in a hurry) and in practice everything else.
    – fraxinus
    Nov 22, 2022 at 20:32

It would be the same principle of the tax haven. The idea could work only for a small country whose economy depends on the money flowing from bigger countries with way bigger economies.

Let's make the opposite hypothesis, the country earns mainly from local investments, to get enough revenues to fund all the public services and save money to prepare for eventual downturns such country should control such a big chunk of the economy that there would be no space for private enterprise. When the government gets such a control over the economy it does not matter whether the ideology is, communist or capitalist, eventually cronyism and clientelism affect the system.

Only a country investing abroad and reinvesting over time for a long period could get to the point that it will need no taxes, but it would have to spread the investment among many countries, investing in a single country would be an enormous risk and create a dependency. But a country that is well managed will also see their per capita GDP grow a lot more than the other countries, with a small medium population the size of the economy would be so big that it could not pull enough dividends from their investments abroad to fund themselves without destabilising the other countries. That is why the population has to be very small.

Singapore is small, but densely populated, I don't know whether it might really reach the point where they need no taxes. You can compare it with Norway, the country is bigger, the population is smaller. They invested abroad for decades part of their oil revenues and still did not reach a point where the government needs no taxes.


At a certain scale, the difference between "investment return" and "tax" begins to become extremely blurry.

Consider a government which invests heavily in domestic industries, acquiring substantial equity in many large companies. The government is now a powerful voting shareholder and contributes to company decisionmaking. It will use its voting power to push for policies that are in its interest - including increasing revenue.

If Milk Co was previously selling gallons of milk for $2 but increases the price to $3 in response to shareholder pressure to increase margins - to what extent is that extra $1 a tax? After all, it is an increase to the cost of essential consumer goods made at the direction of the government, and part of that money goes to the government. The government might not have been the only shareholder to vote for increased margins, but maybe it has a 10% stake and the vote passed 55-45, i.e. would not have passed without the government's vote.

Other times the government might vote to decrease margins, or make other changes. But the point remains that the more equity the government holds in domestic industry, the more the economic choices of domestic industry begin to resemble tax. Increase in margins ~= sales tax increase, pay cuts ~= income tax increase, etc.

It's a little more clear cut for foreign investments, but as the size of the country increases there's less and less foreign companies to invest in, and more and domestic companies. And even then, if the foreign company exports products used in the domestic economy, you begin seeing the same ambiguities.


This is just a tax by another name. Some people are paying for some things and a portion of that payment goes to the government. That portion which goes to the government is effectively a tax even if you call it something different.

Consider a country where a government puts a 20% tax on oil and gas profits. Consider a different country where a government owns 20% of all oil and gas companies. There is no real difference - both governments are getting 20% of oil and gas profits, against the will of the customers (who would like the price to be 20% cheaper) and other shareholders (who would like the price to stay the same but their share of the profit to be 20% higher).

  • Comments are not for extended discussion; this conversation has been moved to chat.
    – ohwilleke
    Nov 22, 2022 at 22:16

This is similar to asking whether a private individual or family could live on their investment returns, without having a job that provides steady income.

It's possible, but unless you were "born with a silver spoon" (i.e. your parents were wealthy enough to set you up for life), you first have to work many years to accumulate these investments. You would have to set aside significant portions of your income as savings to be invested, instead of spending this on your daily needs. Unless you're being paid very well, this is likely to require significant belt-tightening to avoid spending this money; at the very least you might have to forego discretionary expenses like fancy vacations.

If you assume that returns on investment are 5-10% annually, this basically means that you can't live only on the returns until you've accumulated investments worth 10 to 20 times the your annual expenses. If you set aside 10% of your income every year, and you're breaking even on the rest, that will take most of your life (earnings do compound, but also you earn less in the early years of your career).

Of course, most people do get into this situation. When you retire, you mainly have your savings and the returns on your investments to live on (although some people get pensions, and there are government benefits like social security). Many governments provide tax benefits to encourage saving for retirement. But it's also common for expenses to go down -- by the time most people retire, the children are grown and the parents aren't paying their expenses, the mortgage may be paid off, there are no commuting expenses, etc.

What does this mean if we go from the personal analogy to governments? In order to build up reserves that can be invested and produce significant returns, the government will have to set aside a big portion of its income. Governments are generally expected to use their income to provide services to citizens. If the government initially receives much of its income from taxe, the taxpayers may not appreciate that they're paying higher taxes so that some of it can be set aside -- this is not likely to benefit anyone for several generation.

The "silver spoon" mentioned above applies to countries that don't depend as much on taxes. Countries that have valuable natural resources (e.g. oil-rich countries) can use the income from these to build up their reserves. Since the constituents aren't funding this, they're less likely to find this eggregious. On the other hand, whoever is buying the resources might not be willing to pay the markup that's due to the government using this revenue for accumulating cash. So it depends on whether there are other competing countries.

Note that one difference between people and countries is that people expect to die, and you can't take it with you. So when you retire, you only need to be able to fund your expenses for a few decades. You can draw down your reserves in addition to living on the returns. While not always achieved, nations expect to go on forever, so they'd need to build up their investments sufficiently that they rarely need to dip into the principal.

  • If the government has a fiat currency, it is most definitely not "similar to asking whether a private individual or family could live on their investment returns."
    – cjs
    Nov 22, 2022 at 10:06
  • Most currencies are fiat currencies, but I don't get the point you're making. Are you suggesting that they could just declare that the value of the currency is sufficient to purchase what they need? If they change the value of the currency, prices will adjust to reflect it.
    – Barmar
    Nov 22, 2022 at 14:49
  • Very roughly, the wealth of a nation is not in money but primarily in the labour it has available (multiplied by a productivity coefficient). Increasing taxes (or selling government bonds) reduces the money supply, but cannot change that amount of labour available. Thus, if the demand for labour remains equal, the money supply reduction results in deflation. (More often, reduction non money supply causes the demand for labour also to fall as people feel less inclined to invest rather than save, and the economy shrinks.)
    – cjs
    Nov 23, 2022 at 7:40
  • Creating money increases the money supply, but the effects of that depend on other factors. If there is no surplus labour available, the government creating money and spending it to buy labour will merely result in inflation of labour costs, according to the normal laws of supply and demand. If there is surplus labour, the government can create money, pay those people to do productive work, and that increases the size of the economy without inflation. (The hours of labour the government purchased would otherwise go unused, and are lost.)
    – cjs
    Nov 23, 2022 at 7:40
  • How does that labor turn into money that the government can use to pay for things, unless the government collects taxes from the workers and/or employers? Unless it's a communist system in which everyone works for the government, in which case the government trades commodities and services produced by the workers (with money just being an accounting method).
    – Barmar
    Nov 23, 2022 at 16:05

It might be interesting to step back and look at the MMT perspective of this.

A Good Government spends money on projects that generate useful things for their people, and is best spent collectively. It could be maintaining dykes, building a road infrastructure, providing a social safety net, or whatever other program.

The resources from this task have to come from somewhere.

In a modern economy, we use debt-backed fiat currency to run our economy. Every unit of money (I'll call it a dollar) represents someone "owing" you a certain amount of work or resources; it is a debt from the collective economy to you.

Our banking system maintains this by creating new money roughly in parallel with it creating new debts; so when you buy a home and owe 1/4 of a million dollars on it, this is roughly in sync with putting 1/4 of a million dollars into circulation (almost entirely electronically). As the bank clears the debts owed to it, it has to similarly clear the dollars in circulation. ("Putting money in circulation" is basically creating it, because fiat money outside of circulation doesn't matter.)

The government typically pays people with these debt-backed dollars to do the services for the population. This causes a problem in that it makes a bunch of obligations that aren't balanced people obliged to fulfill it. If someone promises to replay 1/4 of a million dollars on a house, if they don't repay that money they lose the house; they have plenty of reason to want to get ahold of dollars. If we just hand out 1/4 of a million dollars without also making a 1/4 of a million debt, then nobody is chasing those dollars. And while money is fungible, when there are more dollars than dollar chasers, the demand for dollars goes down, making those dollars less useful.

To balance this injection of currency into the economy, the government wants to take an equal amount out of the economy.

The traditional way is with taxes. You tax people for an amount roughly equal to your government expenditures, thus keeping the amount of currency in the economy from growing. You can also ask people to volunteer to give you money to keep out of circulation -- we call this "government borrowing money"; and, as an incentive, the government promises to pay them back the money plus interest later.

A government with investments and funding itself from the profits of said investments is doing the same thing, but now the profits on the investments are what the government is removing from circulation.

This acts a lot like taxes, but it is taxes on a the specific surpluses of a specific subsection of the economy. If the government owned piles of farm land, and funded itself off the profits from selling food, this is the government pulling money out of the economy along the food-consumption rate of it.

When pulling money out of the economy, the government needs to be careful about where it pulls the money out. If it pulls it out whenever people eat food, be it taxes on food or on profits from the food it sells, it determines who pays for the services the government provides. In this case, it is proportional to how much food you eat, which is relatively regressive.

Regressive sources of government funding is when the governments money sink pulls money away from people who are relatively poorer. Consumption taxes are examples of a regressive source of government funding; here, "consumption" usually refers to the category of things poor people consume (food, shelter, transport -- scaled up for rich people, but the same category), as opposed to the category of things that richer people consume (things like politicians or economic control and the like, which poor people spend far (absolute and percentage wise) less on).

So all this does is that the country ends up taxing the users of the investment. Now, in some cases the country can manage to arrange for non-members of the polity to pay for this! Imagine a country controlling an important waterway (Suez, Panama, Black sea straits) who funds itself almost entirely from passage fees. 99% of such fees will be people who don't live in the polity -- and you can see how that might be very popular.

At this point I'll digress into the power problem. One thing that makes the people of the free world free is that the economic power of the state is dependent on the people. Dead, oppressed, or rebellious citizens cut into government power; the government must have passive consent of the populace. If the government's source of power is not the people, unless you are extremely careful those in control in the government will not consider the population a problem and not an asset. They are free to oppress the population without a significant hit on the ability of the government to function.

Capture of the state by the exterior resource extraction industry can occur. Those in charge of the resource become more powerful than the democratic voice of the people, and when conflict arises the people lose.


Please take a second and ignore the economics jargon and just conceptualize what you're talking about here.

For example "the state" performs certain administrative duties for which it needs money. And that is true regardless of whether you're a dictatorship or an anarchist community, you need to organize shit and that takes up time and resources.

For example there are certain projects idk infrastructure, healthcare, military, education, research etc that exceed the budget of the average citizen. Meaning you need to pool resources in order to achieve those. And that process of pooling is essentially what "taxation" is.

Again that is true for the any system from the anarchist community to the hierarchical dictatorship what they differ on is how that is organized.

Like who owns it, who gets to use it, who puts up the restrictions on usage, who pays for it, who generates the revenue and who gets to keep the revenue.

Like do the people come together in mutual agreement and share risk, work and reward equally or does a single entity extract the labor and resources but keeps the revenue to themselves (and the goons that uphold that system)?

So it's essentially a question of power, ownership, control and accountability. And if whatever entity that ends up performing the administrative duties relies on a particular source of income (and isn't taking it by force) that source of income holds some power over that entity as depriving them of that money would harm lots of people and create a certain societal pressure to change.

Now historically the entities performing the administrative duties were aristocrats and other dictators who took that power and raised taxes to that end or just for their own well being mostly involuntary. However with the step towards democratic republics it's "the people" who took the ownership of the land and the legislative, juridicative and executive duties that come with it. So taxation has moved somewhat away from just theft to more of a membership fee. And to an extend it is good that the government raises it's income through taxes because that means that they need to have a vested interest in the people and if it's just because they are their cash cow.

And the more you deprive the democratic government of money the more it'll be other entities who will fulfill those administrative duties because there is a lot of power in doing so (and a lot of money to be made). Like think about what it means to have a private army/police, to make your own laws, to brainwash the next generation, to decide over people's life or death... And the police is surprisingly cheap compared to idk the extortion of the mob offering a similar "service". Or what private healthcare ends up costing the consumer compared to public healthcare. Of course the private one is more profitable, the question is do you want it to be more profitable, because that means you're milked more.

So it's not so much about how you call this transfer of money for service it's rather what your role in that process is. Whether you own that company performing the process and by at production cost, whether you work in it or whether you are a costumer or even an involuntary customer.

Now that we've got that out of the way could you use an investment to cover the cost for administrative duties?

Well what even is an investment conceptually? Well it's giving away money and expecting more money to come back in return. So it's essentially getting free money because you're already rich...

Like seriously you're expecting streams of goods and services to go your way without any contribution of your own. Let's just say physics argues that's impossible (to create something out of nothing). So yeah A government might do that, but it certainly goes at the expense of another country or it's own population so it's nothing you could scale or use as a universal model for how societies should organize and chances are good such a thing would be called theft, slavery, colonialism and the like and end brutal...

TL;DR theoretically yes. But apart from small localized edge cases not really and it's not a scalable model.


The distinction between investment returns and taxation has more to do with the style of accountancy than real economic differences.

For example, the state funds and maintains most of the economic inputs into production - secure and lawful environment, a healthy and schooled workforce, military supervision of necessary access to foreign resources, public infrastructure like roads and rail, etc. - and therefore it's right to levy "taxation" on the so-called private sector, arises from it's role as a silent investment partner there.

There is no accounting book kept that exactly quantifies the state's prior stake as investor in particular private sector operations, but equally such books are often missing from inside corporations too when there are central functions whose importance is not disputed, but whose exact contribution to any particular department or site would be difficult to quantify and labourious to account for.

The state does not see itself as entering into specific relationships with other private sector investors, but sees itself as owning the entire economy, and it retains managerial power to set budgets and set the division of returns between itself and any individual (non-state) investors.

Whilst it is possible to identify differences between how the state taxes and how private sector individuals receive investment returns - because the differences are attributable to the different political status of the parties - it is less obvious, on this analysis, what difference could exist between the state taxing and the state receiving investment returns.


It did happen in Norway that they have a significant sovereign wealth fund. Because they have been profiting hugely from oil, and they have relatively small population, it's worth $250,000 per citizen.


In general it could be possible to replace all taxes with that, if governments become more careful with money you can easily cut 3/4 of government spending worldwide.

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    Being more careful with money is not the same as cutting spending let alone 3/4ths of it
    – Joe W
    Nov 19, 2022 at 21:20
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    Norway still has taxes and they are high. Actually one problem is that the country is big and the sparse population requires an expensive infrastructure, but it is not just that and it is very far from reaching the point where they'll need no taxes.
    – FluidCode
    Nov 19, 2022 at 23:28
  • Not going to go over so well in the US : "Norway's sovereign wealth fund is taking steps to become more active in company governance. In the second quarter of 2013, the sovereign fund voted in 6,078 general meetings as well as 239 shareholder proposals on environmental and social issues." - If we didn't spend a trillion dollars on defense and basically the rest on old people, we could have nice things. But the narrative got switched to "environmental and social issues" that no one agrees on and we somehow all forgot that those two aforementioned things is where all the money goes.
    – Mazura
    Nov 20, 2022 at 23:55
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    The idea is nonsense. If Norway (or any similar advanced economy) would cut 3/4 of its state expenditures, its economy would crash. You can't have a First World economy on Third World budgets. It won't be entirely instant - destroying education takes a few years to become visible - but the crash will still be much faster than the recovery.
    – MSalters
    Nov 21, 2022 at 10:15
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    @user253751: Indeed, not a whole lot. In fact, Norway would have to cut its government spending by more than 3/4; they currently spend more than $20.000/person/year. In turn, cutting that spending would hurt their economy, which would lower that $5000, requiring them to cut even further, until Norway basically turns into another Somalia. Or more realistically, until Russia decides to invade and just take those Norwegian oil fields.
    – MSalters
    Nov 21, 2022 at 15:51

This is because there are laws that prevent its government from spending more than what it earns annually unless there are extraordinary circumstances

The takeaway isn't that they raise enough money from investments that they don't need taxes. The important part is that they restrict how much money the government can spend. If you can do that, then you can simply restrict spending to the point where it's 100% covered by your investments.

Good luck doing that, though. Most governments have absolutely zero interest in limiting spending. Without spending limits, your goal is impossible. No matter how much your investments bring in, the government can - and almost certainly will - keep spending way beyond that.

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