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    Public Finance

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    RebeccaDorgu
    Public finance is the study of how governments raise funds and allocate spending. It has three main functions: efficient allocation of resources, macroeconomic stabilization, and distribution of income. Governments provide public goods like infrastructure and social programs that private markets do not. The Philippine government implements fiscal, monetary, and commercial policies to manage public finances. Fiscal policy uses taxes and spending to influence the economy. The government aims to improve efficiency, accountability and transparency in public funds through its Public Financial Management Reform Program.

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    Public Finance

    Uploaded by

    RebeccaDorgu
    282 views33 pages
    Public finance is the study of how governments raise funds and allocate spending. It has three main functions: efficient allocation of resources, macroeconomic stabilization, and distribution of income. Governments provide public goods like infrastructure and social programs that private markets do not. The Philippine government implements fiscal, monetary, and commercial policies to manage public finances. Fiscal policy uses taxes and spending to influence the economy. The government aims to improve efficiency, accountability and transparency in public funds through its Public Financial Management Reform Program.

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    Group 7 MLS 2-G

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    Public finance is the study of how governments raise funds and allocate spending. It has three main functions: efficient allocation of resources, macroeconomic stabilization, and distribution of income. Governments provide public goods like infrastructure and social programs that private markets do not. The Philippine government implements fiscal, monetary, and commercial policies to manage public finances. Fiscal policy uses taxes and spending to influence the economy. The government aims to improve efficiency, accountability and transparency in public funds through its Public Financial Management Reform Program.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    282 views33 pages

    Public Finance

    Uploaded by

    RebeccaDorgu
    Public finance is the study of how governments raise funds and allocate spending. It has three main functions: efficient allocation of resources, macroeconomic stabilization, and distribution of income. Governments provide public goods like infrastructure and social programs that private markets do not. The Philippine government implements fiscal, monetary, and commercial policies to manage public finances. Fiscal policy uses taxes and spending to influence the economy. The government aims to improve efficiency, accountability and transparency in public funds through its Public Financial Management Reform Program.

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    Group 7:

    Ambata, Queenie
    Belmonte, Jillian
    Dorgu, Rebecca
    Lariosa, Jessa
    MLS 2-G

    What is Public Finance?

    Public Finance, field of


    economics concerned with how
    governments raise money, how
    that money is spent, and the
    effects of these activities on the
    economy and on society.

    What is Public Finance?


    Public finance studies how
    governments at all levelsnational,
    state, and localprovide the public
    with desired services and how they
    secure the financial resources to
    pay for these services.

    Three folds of Public Finance


    EFFICIENT
    EFFICIENT
    ALLOCATION OF
    ALLOCATION
    OF
    RESOURCES
    RESOURCES

    PUBLIC
    PUBLIC
    FINANC
    FINANC
    E
    E
    MACROECONOMIC
    MACROECONOMIC
    STABILIZATION
    STABILIZATION

    DISTRIBUTION
    DISTRIBUTION OF
    OF
    INCOME
    INCOME

    The importance of Public Finance


    Governments provide public goods
    government-financed items and services
    such as roads, military forces, lighthouses,
    and street lights.
    Private citizens would not voluntarily pay
    for these services, and therefore businesses
    have no incentive to produce them.

    The importance of Public Finance


    Public finance also enables
    governments to correct or offset
    undesirable side effects of a market
    economy.
    Public finance provides government
    programs that moderate the
    incomes of the wealthy and the
    poor.

    The importance of Public Finance


    These programs include social security,
    welfare, and other social programs.
    For example, some elderly people or
    people with disabilities require financial
    assistance because they cannot work.

    Significance of Public Finance

    Every body realizes necessity of money. The importance of money is too much
    not only for individual but for the state also. The state has to perform number of
    functions for which money (funds) is required. For beginning of any function
    funds (finance) is must and in view of this the public finance nowadays has vital
    importance. Its importance can be easily understood from the functions of public
    finance. They are:

    Allocative Function
    Distributive Function
    Stabilization Function

    Functions Of Public Finance


    Allocative Function

    It refers to the process by which total resource use is divided


    between private and social goods by which the mix of social goods is
    chosen, this is done by the budgetary policy.
    Distributive Function

    The budgetary policy also affects the distribution of income in the


    community. The tax and expenditure measures are adopted to modify
    the existing distribution with a view to reducing economic inequalities.
    Stabilization function

    The budgetary policy can also be used to maintain a high level


    employments reasonable degree of price level stability, an appropriate
    rate of economic growth and stability in the balance of payment.

    TOP 10 COUNTRIES IN THE


    WORLD WITH LOWEST
    EXPENDITURE(% GDP 2013)
    (source: http://data.worldbank.org/indicator)

    1. BANGLADESH 5.1

    2. CAMBODIA 5.2

    3. NICARAGUA 5.7

    4. VIETNAM 6.2

    5. ROMANIA 6.2

    6. MACAO SAR, CHINA 6.5

    7. EQUATORIAL GUINEA 6.7

    8. UNITED ARAB EMIRATES 6.8

    9. GAMBIA, THE 7.5

    10. SUDAN 7.5

    TOP 10 COUNTRIES IN THE WORLD WITH HIGHEST


    REVENUE EXCLUDING GRANTS (% GDP 2012)

    (source: http://data.worldbank.org/indicator)

    1. KIRIBATI 66.5

    2. KUWAIT 61.7

    3. NORWAY 49.1

    4. OMAN 44.7

    5. GREECE 42.7

    6. FRANCE 42.4

    7. AZERBAIJAN 41.8

    8. BELGIUM 41.4

    9. BOSNIA AND HERZEGOVINA 40.2

    10. ANGOLA 40.2

    TOP 10 COUNTRIES IN THE WORLD WITH LOWEST


    REVENUE EXCLUDING GRANTS (% GDP 2012)

    (source: http://data.worldbank.org/indicator)

    1. SAMOA 0.0

    2. UNITED ARAB EMIRATES 3.2

    3. NIGERIA 5.0

    4. AFGHANISTAN 9.9

    5. CENTRAL AFRICAN REPUBLIC 11.1

    6. JAPAN 11.2

    7. GUATEMALA 11.5

    8. SIERRA LEONE 12.2

    9. INDIA 12.4

    10. PAKISTAN 12.7

    Budget by Department and Special


    Purpose Fund TOP 10 DEPARTMENTS

    1. DepEd 292.7 B

    2. DPWH 152.9 B

    3. DND 121.6 B

    4. DILG 121.1 B

    5. DA 74.1 B

    6. DOH 56.8 B

    7. DSWD 56.2 B

    8. DOTC 37.1 B

    9. DOF 33.2 B

    10. DENR 23.7 B

    Issues and Problems

    TAXATION
    GOVERNMENT EXPENDITURES
    BUDGET PROCESS
    PUBLIC DEPT

    Issues and Problems

    Taxation
    These issues cover the following
    topics:
    (1) tax performance
    (2) tax incidence

    Tax Performance
    Tax performance is by far the most widely researched topic
    in the area of taxation. Tax performance refers to the
    degree at which a countrys tax base or taxable capacity
    has been exploited in its effort to mobilize government
    resources.

    Tax Incidence
    Tax incidence studies attempt to answer the question:
    who bears the tax burden in the economy?
    Taxation, in general, reduces the personal income,
    transfers in the form of gifts or inheritance and land
    rentals of some people and increases the prices of
    goods and services consumed by others. These losses
    and price increases consist the tax burden to these
    people.

    Government Expenditures
    Time lags a delay between an economic action
    and a consequence. There may be a
    considerable time-lag between spending and
    the benefits that arise.
    Crowding Out Crowding out can be defined at
    the process of squeezing out the privately
    owned manufacturing sector by the expansion
    of the public sector.

    Higher taxes in the future The


    government will need to reduce
    borrowing as a % of GDP. It means
    future budgets will need to increase
    taxes or limit spending.
    Distribution of Income The unequal
    distribution of household or
    individual income across the various
    participants in an economy. It is
    often associated with the idea of
    income.

    Budget Process
    Issues related to the budget system
    may be divided into: (1) the budget
    and economic development and (2)
    administrative issues.

    The Budget and Economic Development

    Fernandez work (1973) is by far the most comprehensive attempt


    to describe and evaluate the countrys economic development
    efforts through the national budget. Based on Lampmans (1967)
    estimates of the sources of growth in the Philippines, she
    concludes that the governments contribution to average GNP
    growth for the period 1955-1965 is 0.35 of one per cent.

    Riha (1975) on the other hand, estimated the effect of budget


    changes in GNP using the demand type model used by Hansen
    (1969). He found out that year to year changes in the budget
    exerted an upward push on GNP of 0.63 per cent on the average
    for 1947-1973

    Administrative Issues
    Fernandez (1975) pointed out that the delineation of budget expenditures
    into current operating and capital outlays tends to be misleading in as
    much as current expenditures may contain a developmental element.
    She also noted that fiscal planning should imply planning the budget over
    the medium term rather than planning it annually. This is especially
    critical when one considers the capital formation process which usually
    involves time lags.
    Claudio (1978) likewise stressed the need for long-term budgeting. She
    outlined the factors that must be taken into consideration in the
    preparation of a long-term budget. She also discussed the relationship of
    long-term budgeting to other budgeting approaches like zero-base
    budgeting, key budgetary inclusion technique and regional budgeting.

    Public Debt
    Existing literature on public debt in
    the Philippines have concentrated
    on two issues: (1) the level of debt
    and (2) debt and inflation.

    The level of debt


    Sioson (1975) noted that compared to that of the US
    and those of other Asian countries (Ceylon, Malaysia),
    the Philippine ratio of public debt to GNP is low. She
    also showed that interest payments and debt service
    (interest plus repayments) had remained low relative
    to total government expenditure.

    Debt and Inflation


    One of the causes often cited for inflation is public debt via
    its effect on the money supply level. Sioson (1975)
    concludes that since money supply expansion is not a
    principal factor in Philippine inflation, public borrowings
    which contribute to increases in money supply not have a
    significant bearing in Philippine inflation. She based this
    statement on the works of Ross (1966) and Bautista (1975)
    which related the price level and changes in the price level
    to the money supply and found no significant relationship.
    Of course, this is not exactly the best way to test the
    hypothesized relationship between public debt and inflation.

    Philippine Policy on Public Finance

    Monetary
    Commercial
    Fiscal

    Fiscal Policy
    Fiscal policy refers to the measures employed by
    governments to stabilize the economy, specifically by
    manipulating the levels and allocations of taxes and
    government expenditures.
    Fiscal measures are frequently used in tandem with
    monetary policy to achieve certain goals. In the
    Philippines, this is characterized by continuous and
    increasing levels of debt and budget deficits, though
    there have been improvements in the last few years.

    Importance of Fiscal
    Government activities are enlarged
    Tax-revenue and expenditure accounts
    for large proportion of GNP
    It indicates the level of overall
    borrowings by the government.
    It is the indicator of fiscal health of the
    economy.

    Commercial policy

    Its is known as the


    export import policy of
    a country

    Importance of Commercial Policy


    Economic development
    Earning foreign exchange and
    developing industries
    Regulate and promote foreign trade
    Balance trade
    Increase export and reduce imports

    Monetary Policy

    The process by which the


    monetary authority of a
    country controls the supply
    of money.

    Goals of Monetary Policy

    Higher economic growth


    Higher rate of employment
    Price Stability
    Neutrality of money
    Stability
    Instruments of monetary policy

    Philippine Policy on Public


    Finance

    The Public Financial Management (PFM)


    Reform Program aims to improve
    efficiency, accountability and
    transparency in public fund use in order
    to ensure the direct, immediate,
    substantial and economical delivery of
    public services especially to the poor.
    The Program implements the key
    strategies of the Philippine PFM Reform
    Roadmap: Towards Improved
    Accountability and Transparency (20112016), a comprehensive reform agenda
    that seeks to clarify, simplify,
    improve and harmonize the
    governments financial management
    processes and information systems.
    The integrated systems will cover all
    transactions of government and apply
    uniformly to all government agencies.

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