I'm guessing you're talking about an RFID tag. the ones with no batteries are powered by EM energy emitted by the reader. Yes, anyone with a reader can tell where you are if they can read the chip. in order to read the chip it usually has to be within fairly close range of the reader so that it can get enough energy to transmit.
your post was a bit short on details so I'm just guessing this is a device used for toll collection, but usually the ones used in vehicles for that purpose have batteries ("active") because an active transmitter can generally be read from much farther away since it's not reliant on whatever power it can get out of the "air". so i would be kind of surprised to hear that you have a passive device meant to be read from a moving vehicle, but I suppose it's possible.
if it was inserted under the skin the same thing would happen, they could charge you tolls and track where you're going.
i understand this is already being done to pets. but no, of
course the government would never come up with any nefarious spying schemes. in any case, you can probably prevent it from being read by enclosing it in a piece of aluminum foil or any conducting container. it's the tags you
don't know about that should worry you.