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    This document discusses public finance, which focuses on how governments raise and spend funds. It covers three key areas: public expenditure, public revenue, and fiscal policy. Public expenditure is how governments spend money, public revenue is how they raise money through taxes and other sources, and fiscal policy uses spending and taxes to achieve economic goals. The document provides definitions and explanations of these concepts, as well as the objectives and components of public finance systems.

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    This document discusses public finance, which focuses on how governments raise and spend funds. It covers three key areas: public expenditure, public revenue, and fiscal policy. Public expenditure is how governments spend money, public revenue is how they raise money through taxes and other sources, and fiscal policy uses spending and taxes to achieve economic goals. The document provides definitions and explanations of these concepts, as well as the objectives and components of public finance systems.

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    PUBLIC FINANCE

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    This document discusses public finance, which focuses on how governments raise and spend funds. It covers three key areas: public expenditure, public revenue, and fiscal policy. Public expenditure is how governments spend money, public revenue is how they raise money through taxes and other sources, and fiscal policy uses spending and taxes to achieve economic goals. The document provides definitions and explanations of these concepts, as well as the objectives and components of public finance systems.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    18 views21 pages

    Pub - Fin

    Uploaded by

    jay diaz
    This document discusses public finance, which focuses on how governments raise and spend funds. It covers three key areas: public expenditure, public revenue, and fiscal policy. Public expenditure is how governments spend money, public revenue is how they raise money through taxes and other sources, and fiscal policy uses spending and taxes to achieve economic goals. The document provides definitions and explanations of these concepts, as well as the objectives and components of public finance systems.

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    Public

    Finance
    JHAY ACQUIATAN
    PUBLIC FINANCE
    a branch of economics that focuses on the study of
    how governments at various levels (local,
    regional, and national) raise and spend funds to
    fulfill their functions and achieve economic and
    social objectives.

    It focuses on three key areas:


    Public expenditure: How the government spends money.
    Public revenue: How the government raises money.
    Fiscal policy: How the government uses spending and taxes to achieve economic goals.
    PUBLIC FINANCE
    Adam Smith - “Public finance is an
    investigation into the nature and principles
    of the state revenue and expenditure”

    Prof. Dalton - “Public finance is concerned


    with income and expenditure of public
    authorities and with the mutual adjustment
    of one another.”
    The government of every country has to perform
    certain special functions which can be classified
    under two heads;

    1. Obligatory Functions - These are essential functions that a


    government must perform to protect its citizens and ensure the
    basic functioning of society.

    2. Optional Functions- These are functions that a government may


    choose to perform depending on its priorities, resources, and political
    ideology
    OBLIGATORY FUNCTIONS

    National Defense: Protecting the


    country from external threats
    through military and security
    forces.

    Maintaining Law and Order:


    Establishing and enforcing laws to
    ensure public safety and security
    within the country.

    Administration of Justice:
    Providing a fair and impartial
    judicial system to resolve disputes
    and enforce laws.
    OPTIONAL FUNCTIONS

    Social Welfare Programs:


    Providing financial assistance,
    healthcare, or other services to
    citizens in need.

    Economic Development:
    Implementing policies and
    programs to promote economic
    growth and job creation.

    Environmental Protection:
    Regulating activities to protect the
    environment and natural resources.
    The term public finance is a combination of two words,
    namely “Public” and “Finance”.

    • The ‘public’ is represented by the government or state.


    • The other word ‘finance’ means money resources.
    • These money resources are in the form of income and
    expenditure.
    OBJECTIVES OF PUBLIC FINANCE

    1. To Secure adjustments in allocation of Resources


    2. To maintain economic stability
    3. To accelerate economic development
    4. To secure distributive justice
    5. To reduce economic inequalities
    6. To achieve full employment
    7. To achieve optimum utilisation of resources
    8. To increase rate of capital formation by increasing
    the rate of saving and investment
    COMPONENTS OF PUBLIC FINANCE

    1. PUBLIC REVENUE - THE INCOME OF THE GOVERNMENT THROUGH


    ALL SOURCES.

    NARROW SENSE - IT INCLUDES ONLY THOSE SOURCES OF INCOME OF THE


    GOVERNMENT WHICH ARE DESCRIBED AS REVENUE
    RESOURCES.

    WIDER SENSE – IT INCLUDES ALL THE INCOME AND RECEIPTS OF THE


    GOVERNMENT IRRESPECTIVE OF THEIR SOURCES.
    SOURCES OF PUBLIC REVENUE

    A. TAX REVENUE- IS THE INCOME THAT IS GAINED BY GOVERNMENTS THROUGH


    TAXATION.

    (1) DIRECT TAXES - A TAX THAT IS PAID DIRECTLY BY THE TAXPAYER TO THE
    GOVERNMENT.

    (2) INDIRECT TAXES - A TAX THAT IS COLLECTED BY ONE ENTITY (USUALLY A


    BUSINESS) BUT ULTIMATELY BORNE BY ANOTHER ENTITY (USUALLY THE
    CONSUMER)
    SOURCES OF PUBLIC REVENUE

    A. TAX REVENUE- IS THE INCOME THAT IS GAINED BY GOVERNMENTS THROUGH


    TAXATION.

    (1) DIRECT TAXES - A TAX THAT IS PAID DIRECTLY BY THE TAXPAYER TO THE
    GOVERNMENT.

    (2) INDIRECT TAXES - A TAX THAT IS COLLECTED BY ONE ENTITY (USUALLY A


    BUSINESS) BUT ULTIMATELY BORNE BY ANOTHER ENTITY (USUALLY THE
    CONSUMER)
    B. NON TAX REVENUE- ARE RAISED BY THE GOVERNMENT FROM OTHER THAN
    TAX IN THE ECONOMY.

    *ADMINISTRATIVE REVENUE (FEES,FINES, PENALTIES ETC)


    *COMMERCIAL REVENUE (RAILWAYS,POST, ETC.)
    *OTHER REVENUES (GIFTS, GRANTS & DONATIONS)
    COMPONENTS OF PUBLIC FINANCE
    2.PUBLIC EXPENDITURE - REFERS TO THE EXPENDITURE INCURRED BY THE PUBLIC AUTHORITIES.

    Types of Public Expenditure:

    Social Expenditures: These include spending on social security programs (pensions, disability
    benefits), healthcare, education, and welfare programs. They aim to promote social wellbeing and
    reduce poverty.
    Economic Expenditures: This encompasses spending on infrastructure (roads, bridges,
    transportation), research and development, and subsidies for businesses. These aim to stimulate
    economic growth and development.

    Defense Expenditures: This covers spending on the military, national security, and defense-related
    activities.
    Administrative Expenditures: These involve funds for running the government itself, including
    salaries for public servants, office supplies, and other operational costs.
    COMPONENTS OF PUBLIC FINANCE

    3.PUBLIC DEBT
    refers to the loans raised by the
    government both internally and externally
    often referred to as national debt, refers to the total amount of money a government owes to its lenders. It is
    essentially the accumulated borrowing by a government over time to finance its spending and fill budget
    gaps.

    Composed of internal and external debt: Internal debt is owed to domestic lenders within the
    country, while external debt is owed to foreign lenders.

    Used for various purposes: Funding infrastructure projects, social programs, military spending, and
    responding to crises are some common uses of borrowed funds.
    WHY DOES PUBLIC
    DEBT MATTER?
    WHY DOES PUBLIC
    DEBT MATTER? STIMULATING THE ECONOMY
    During economic downturns,
    increased government
    spending financed by debt
    can help boost economic
    activity.
    FINANCING NEEDED INVESTMENTS
    Debt can be a tool to finance
    important infrastructure
    projects or social programs
    that might not be possible
    with current tax revenue

    POTENTIAL BENEFITS
    alone.
    POTENTIAL
    DRAWBACKS BURDEN ON FUTURE
    GENERATIONS:
    HIGH DEBT LEVELS CAN
    Ultimately, future
    BE UNSUSTAINABLE
    generations will be
    If debt grows faster than the responsible for repaying
    economy, it can become the debt, potentially
    increasingly difficult to limiting their own fiscal
    service the debt, leading to resources.
    higher interest payments and
    potentially crowding out
    private investment.
    MANAGING PUBLIC DEBT RESPONSIBLY

    Finding the right balance between using debt for productive purposes and avoiding
    unsustainable levels is crucial for responsible fiscal management. Governments employ various
    strategies to manage their debt, including:

    Controlling spending: Prioritizing efficient spending and avoiding unnecessary deficits is


    key to keeping debt in check.
    Economic growth: A growing economy generates more tax revenue, making it easier to
    service and eventually reduce debt.
    Extending debt maturities: Issuing longer-term bonds can spread out debt payments and
    reduce near-term pressure.
    Diversifying creditors: Borrowing from a wider range of lenders can reduce dependence on
    any single source and potentially lower interest rates.
    COMPONENTS OF PUBLIC FINANCE

    4.FINANCIAL ADMINISTRATION
    refers to the study of
    different aspects of public budget.

    5.ECONOMIC STABILIZATION

    the use of public revenue and public expenditure to


    secure economic stability and growth.
    Questions
    THANK YOU!

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