It's very common in the U.S. It's ostensibly done to gather evidence of discrimination. Most government forms require it, and large employers are required to report the racial/ethnic makeup of their staff to the government, along with gender, past military service, and persons with disabilities. California recently added a requirement for VCs to ask the founders they fund their sexual orientation.

People have written entire books on the politics behind how the government comes up with the sometimes-illogical categories into which folks are divided.

See e.g. https://reason.com/volokh/2023/03/25/my-comment-on-the-ombs-... for discussion on the "hispanic" designation.