Contents • • • • • • • • • • • • • • • • • • • Overview [ ] The proper role of government provides a starting point for the analysis of public finance. In theory, under certain circumstances, will allocate goods and services among individuals efficiently (in the sense that no waste occurs and that individual tastes are matching with the economy's productive abilities). If private markets were able to provide efficient outcomes and if the distribution of income were socially acceptable, then there would be little or no scope for government. In many cases, however, conditions for private market efficiency are violated. For example, if many people can enjoy the same good at the same time (non-rival, non-excludable consumption), then private markets may supply too little of that good. National defense is one example of non-rival consumption, or of a. ' occurs when private markets do not allocate goods or services efficiently.
The existence of market failure provides an efficiency-based rationale for collective or governmental provision of goods and services.,, informational advantages, strong economies of scale, and network effects can cause market failures. Public provision via a government or a voluntary association, however, is subject to other inefficiencies, termed '.' Under broad assumptions, government decisions about the efficient scope and level of activities can be efficiently separated from decisions about the design of taxation systems (Diamond-Mirlees separation). In this view, programs should be designed to maximize social benefits minus costs ( analysis), and then revenues needed to pay for those expenditures should be raised through a system that creates the fewest efficiency losses caused by of economic activity as possible.
In practice, government or is substantially more complicated and often results in inefficient practices. Government can pay for spending by borrowing (for example, with ), although borrowing is a method of distributing tax burdens through time rather than a replacement for taxes. A is the difference between government spending and revenues. The accumulation of deficits over time is the total public.
Deficit finance allows governments to smooth tax burdens over time, and gives governments an important tool. Deficits can also narrow the options of successor governments.
Public finance is closely connected to issues of and social equity. Governments can reallocate income through or by designing tax systems that treat high-income and low-income households differently.
The approach to public finance seeks to explain how self-interested voters, politicians, and bureaucrats actually operate, rather than how they should operate. Objectives of public finance [ ] The main objectives of public finance are to regulate the important sectors of the country (industry, agriculture, foreign trade and transport) and to facilitate the economic activities of government and the private sector; to provide the basic services to its citizens such as defense, maintenance of law and order, and protection of life and property; to provide social services for the people, e.g. Education, medical care and social security; to ensure economic stability and attain a reasonable rate of development; and to indicate priorities of investment. Public finance management [ ] Collection of sufficient resources from the economy in an appropriate manner along with allocating and use of these resources efficiently and effectively constitute good financial management. Resource generation, resource allocation and expenditure management (resource utilization) are the essential components of a public financial management system. Public finance management (PFM) basically deals with all aspects of resource mobilization and expenditure management in government.
These pages contain my lecture notes for a PhD course in International Trade I taught at Boston College between 2001-2003. Feel free to use them however you may.
Just as managing finances is a critical function of management in any organization, similarly public finance management is an essential part of the governance process. Public finance management includes resource mobilization, prioritization of programmes, the budgetary process, efficient management of resources and exercising controls. Rising aspirations of people are placing more demands on financial resources. At the same time, the emphasis of the citizenry is on value for money, thus making public finance management increasingly vital.
The following subdivisions form the subject matter of public finance. • Public expenditure • Public revenue • Public debt • Financial administration • Federal finance Government expenditures [ ]. Main article: Economists classify government expenditures into three main types.
Government purchases of goods and services for current use are classed as. Government purchases of goods and services intended to create future benefits – such as infrastructure investment or research spending – are classed as. Government expenditures that are not purchases of goods and services, and instead just represent transfers of money – such as social security payments – are called.
Government operations [ ]. See also: • – Some forms of government expenditure are specifically intended to income from some groups to others. For example, governments sometimes transfer income to people that have suffered a loss due to natural disaster. Likewise, public programs transfer wealth from the young to the old. Other forms of government expenditure which represent purchases of goods and services also have the effect of changing the income distribution. For example, engaging in a may transfer wealth to certain sectors of society. Transfers wealth to families with children in these schools.
Public transfers wealth from people that do not use the roads to those people that do (and to those that build the roads). • • • • Financing of government expenditures [ ]. Main article: Government expenditures are financed primarily in three ways: • • • (revenue from,, sales of assets, or ) • • How a government chooses to finance its activities can have important effects on the distribution of income and wealth () and on the efficiency of markets (). The issue of how taxes affect income distribution is closely related to, which examines the distribution of tax burdens after market adjustments are taken into account. Public finance research also analyzes effects of the various types of taxes and types of borrowing as well as administrative concerns, such as tax enforcement. Main articles: and Taxation is the central part of modern public finance. Its significance arises not only from the fact that it is by far the most important of all revenues but also because of the gravity of the problems created by the present day tax burden.
The main objective of taxation is raising revenue. A high level of taxation is necessary in a welfare State to fulfill its obligations. Taxation is used as an instrument of attaining certain social objectives i.e.
As a means of redistribution of wealth and thereby reducing inequalities. Taxation in a modern Government is thus needed not merely to raise the revenue required to meet its ever-growing expenditure on administration and social services but also to reduce the inequalities of income and wealth.
Taxation is also needed to draw away money that would otherwise go into consumption and cause inflation to rise. Indian House Electrical Wiring Diagram Pdf there. A tax is a financial charge or other imposed on an individual or a by a or a functional equivalent of a state (for example,, movements or movements). Taxes could also be imposed by a. Taxes consist of or, and may be paid in or as labor.
A tax may be defined as a 'pecuniary burden laid upon individuals or property to support the government [...] a payment exacted by legislative authority.' A tax 'is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority' and is 'any contribution imposed by government [...] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name.' • There are various types of taxes, broadly divided into two heads – direct (which is proportional) and indirect tax (which is differential in nature): •, levied on documents • tax (tax levied on production for sale, or sale, of a certain good) • (tax on business transactions, especially the of ) • (VAT) is a type of sales tax • Services taxes on specific services •; (UK), Registration Fee (USA), Regco (Australia), Vehicle Licensing Fee (Brazil) etc. • • (taxes on importation, levied at ) • on ( entities) • • (may be levied on individuals, families such as the in India,, etc.) Debt [ ].
Main article: Governments, like any other legal entity, can take out, issue and make. Government debt (also known as public debt or national debt) is (or ) owed by any level of; either,. Some local governments issue bonds based on their taxing authority, such as. As the government represents the people, government debt can be seen as an indirect debt of the. Government debt can be categorized as, owed to lenders within the country, and, owed to foreign lenders. Governments usually borrow by issuing such as and bills. Less creditworthy countries sometimes borrow directly from or international institutions such as the International Monetary Fund or the World Bank.
Most government budgets are calculated on a cash basis, meaning that revenues are recognized when collected and outlays are recognized when paid. Some consider all government liabilities, including future payments and payments for goods and services the government has contracted for but not yet paid, as government debt. This approach is called accrual accounting, meaning that obligations are recognized when they are acquired, or accrued, rather than when they are paid. This constitutes public debt.
Seigniorage [ ]. Further information: Public finance in centrally planned economies has differed in fundamental ways from that in market economies. Some state-owned enterprises generated profits that helped finance government activities. The government entities that operate for profit are usually manufacturing and financial institutions, services such as nationalized healthcare do not operate for a profit to keep costs low for consumers. The Soviet Union relied heavily on turnover taxes on retail sales.
Sale of natural resources, and especially petroleum products, were an important source of revenue for the Soviet Union. In market-oriented economies with substantial state enterprise, such as in Venezuela, the state-run oil company PSDVA provides revenue for the government to fund its operations and programs that would otherwise be profit for private owners. In various mixed economies, the revenue generated by state-run or state-owned enterprises are used for various state endeavors; typically the revenue generated by state and government agencies goes into a.
An example of this is the and Singapore's. Various systems or proposals utilize revenue generated by state-run enterprises to fund social dividends, eliminating the need for taxation altogether. Government finance statistics and methodology [ ] Macroeconomic data to support public finance economics are generally referred to as fiscal or government finance statistics (GFS). Is the internationally accepted methodology for compiling fiscal data. It is consistent with regionally accepted methodologies such as the and consistent with the methodology of the and broadly in line with its most recent update, the. Measuring the public sector [ ] The size of governments, their institutional composition and complexity, their ability to carry out large and sophisticated operations, and their impact on the other sectors of the economy warrant a well-articulated system to measure government economic operations.
The GFSM 2001 addresses the institutional complexity of government by defining various levels of government. The main focus of the GFSM 2001 is the general government sector defined as the group of entities capable of implementing public policy through the provision of primarily non market goods and services and the, with both activities supported mainly by compulsory levies on other sectors. The GFSM 2001 disaggregates the general government into subsectors: central government, state government, and local government (See Figure 1).
The concept of general government does not include. Easytools Frontend Keygen Anleitung. The general government plus the public corporations comprise the public sector (See Figure 2).
Figure 2: Public Sector(IMF Government Finance Statistics Manual 2001(Washington, 2001) pp.15 The general government sector of a nation includes all non-private sector institutions, organisations and activities. The general government sector, by convention, includes all the public corporations that are not able to cover at least 50% of their costs by sales, and, therefore, are considered non-market producers. In the European System of Accounts, the sector “general government” has been defined as containing: • “All institutional units which are other non-market producers whose output is intended for individual and collective consumption, and mainly financed by compulsory payments made by units belonging to other sectors, and/or all institutional units principally engaged in the redistribution of national income and wealth”. • Gruber, Jonathan (2005). Public Finance and Public Policy. New York: Worth Publications.
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External links [ ] Wikimedia Commons has media related to. • • (see 'fiscal sector').