Gauri Pal Public Finance

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PUBLIC FINANCE

Presented by :- Mrs Gauri Pal

SMBA24


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PUBLIC FINANCE

It is the definitive branch of economics which

assesses the Government revenue and Government

expenditure of the Public Authorities and the

adjustment of one or the other to achieve desirableeffects and avoid undesirable ones.


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CLASSIFICATION OF PUBLIC FINANCE

Public finance can be categorized into the

following sections

Public Revenue Income for the government

Public Expenditure Spending for the

society Public Debt Borrowings from internal and

external sources


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NON TAX REVENUE

Profit at BSE

Fines

EscheatsHidden Resources

Gifts

Public DebtsCapital Gains


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TAX IMP SOURCE OF REVENUE

Ideal tax structure should posses the following properties

1. Distribution of the tax burden should be progressive (

richer to pay more than the poorer)

2. Should help to attain growth and stability3. Should improve the efficiency of the martket

4. Should be easy to implement administratively


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DIRECT TAXES INDIRECT TAXES

Personal Income Tax Corporate Tax

Capital Gains and Wealth

Tax

Interest tax Expenditure tax

Customs Duties Union Excise duties

Service Tax

Value Added Tax


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CANONS OF TAXATION

Canons of taxation were laid down by Adam Smith

these aresimple principles or ground rules on which tax policies are based

The canons or principles of taxation are

1. Economic (cost effective, meaning it should cost less to collectthe taxes than the tax revenue)

2. Equity (fair taxation in terms of horizontal and vertical equity)

3. Certainty (people should know how and when to pay)

4. Convenience (simplicity or ease)


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DIRECT TAX( TAX PAID BY A PERSON ON WHOM IT IS LEGALLY IMPOSED)

ADVANTAGES DISADVANTAGES

Equitable as is imposed onthe person based on

property or income There is a certainty of time ,

amount for the tax

Elastic Govt. changes ratebased on your income

Enhances consciousness ,since the pinch is felt by themango man hence they candemand for the welfare of thenation

Mental pinch to the taxpayersas they have to curtail their

income to pay to thegovernment.

Feel inconvenience as thegovernment impose taxprogressively.

Parallel economy Expensive for govt. To collect

tax individually


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INDIRECT TAX( TAX IMPOSED ON ONE PERSON BUT PARTLY OR WHOLLY PAID BY ANOTHER)

ADVANTAGES DISADVANTAGES

convenient as the taxpayer does

not have to pay a lump sum

amount for tax

mass participation. Each andevery person getting goods or

services has to pay tax

less chance of tax evasion as the

taxpayers pay the tax collected

from consumers government can check on the

consumption of harmful goods by

imposing higher taxes

uncertain. As demand fluctuates,

tax will also fluctuate

regretful as the tax burden to the

rich and poor is same bad effect on consumption,

production and employment.

Higher taxes will reduce all of

them

Most of the taxes are included inthe price of goods or service


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PUBLIC EXPENDITURE

It is incurred to provide public goods andservices.

Public expenditure can be defined as,

"The expenditure incurred by publicauthorities like central, state and localgovernments to satisfy the collective social

wants of the people is known as publicexpenditure."

Tends to rise over time and its growth rate isgenerally higher than that of the GDP.


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CLASSIFICATION( SYSTEMATIC ARRANGEMENT OF DIFFERENT ITEMS ON WHICH THE

GOVERNMENT INCURS EXPEND )

DEVELOPMENT NON DEVELOPMENT

All expenditures that

promote economic growthand development are

termed as development

expenditure

Unproductive expenditures

are termed as nondevelopment expenditures.


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CAUSES & GROWTH OF PUBLIC EXPENDITURE

Rising Revenue and Non Plan Expenditures

Rising Subsidies

Interest Burden

Defense Expenditure

Growth in National Income

Growth of population

Urbanization

Government Administration


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CONTROLS FOR PUBLIC EXPENDITURE

Improving quality of expenditure

Fiscal reforms for states

More expenditures on infrastructure / socials

Increasing user charges

Cutting subsidies

Retirement of old debt

Reduction in non developmental expenditure

Cut in interest rates


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PUBLIC FINANCE / DEBT

When the expenditure of

the government

exceeds revenue, a

deficit arises in thebudget which is bridged

by borrowing from public

or deficit financing


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WHY IS DEBT NECESSARY?

Smoothening out the tax rate

Macro economic stabilization

Financing war or epidemic rehabs or otheremergency expenditures

Financing expenditure on human capital

formation

For undertaking financial investments


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TYPES OF DEBTS

INTERNAL DEBT EXTERNAL DEBT

Internal debt owed by a

government (money a

government borrows from its

citizens) is part of the

country's national debt it is a

form of fiat creation of money in

which the government obtains

cash not by printing it, but byborrowing it

External debt (or foreign debt) is

that part of the total debtin a

country that is owed

to creditorsoutside the country.

The debtors can be the

government, corporations or

private households
http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Debt


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MEASURES TO MANAGE PUBLIC DEBT

Reduction in primary deficit

Reduction in growth of current expenditure

Statutory ceiling on debt

Raising efficiency of borrowing program

Local government bonds

Foreign institutional investors and public debt

Consolidated sinking funds

Limits on government guarantees


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THANK YOU

Gauri Pal Public Finance

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