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
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