Members:Jinn Hermano Amerose Magsayo Kristelle Joy Tabernilla Charist Jean BalbiniAugustine Marie Galanto

PUBLIC FINANCE

It is the study of the role of the government in the economy

It is concerned with the government's revenue and expenditure and the effects of these activities to the economy and to the society.

Government revenue

It is the money received by the government

SourcesSources

Tax RevenueNon Tax Revenue

SourcesTax Revenue

- income acquired by the government through taxation

Capital Gains Tax Documentary Stamp Tax Donor's Tax Estate Tax Income Tax Percentage Tax Value Added Tax Excise Tax Withholding Tax on Compensation Expanded Witholding Tax Final Withholding Tax Withoolding Tax on Government Money Payments.

SourcesNon-tax Revenue

- income acquired by the government which was not generated from taxes

Fees Fines or Penalties Surplus from Public Enterprise Grants and Gifts

Government Expenditures

It includes all the government's consumption, investment, and transfer payments.

Government ExpendituresGovernment Expenditures

Exhaustive spending Transfer spending.

Government ExpendituresGovernment Expenditures

Exhaustive spending:Exhaustive spending: refers to purchases refers to purchases made by a government for the production of made by a government for the production of public goods. public goods.

Government ExpendituresGovernment Expenditures

Transfer spendingTransfer spending when government transfers when government transfers income to people to help them support income to people to help them support themselves. themselves.

Government ExpendituresGovernment Expenditures Transfers can be subdivided into two:Transfers can be subdivided into two:

Cash transfers are cash payments, such as Cash transfers are cash payments, such as social security checks and welfare payments. social security checks and welfare payments.

In-kind transfers involve no cash payments but In-kind transfers involve no cash payments but instead transfer goods or services to recipients. instead transfer goods or services to recipients. Examples of in-kind transfers include food stamp Examples of in-kind transfers include food stamp coupons and Medicare. coupons and Medicare.

The Threefold preview of Public Finance

Economic Efficiency(efficient allocation of resources) distribution of income Macroeconomics(macroeconomic stabilization)

Importance of Public Finance

Taxation Protection of Infant Industries Provision Public Goods Side Effects of a Market Economy Redistribute of Income Equity

Importance of Public Finance

Subsidies and grants Optimum utilization of resources Economic planning Providing employment

opportunities Market Failures

Reasons why there is Growth of Public expenditure

Expansion of State Activities Internal Security Defense Expenditure Urbanization Rural Development Price Rise Population Social Welfare Public Debt Burden of Democracy Economic Planning

What AFFECTS Public Finance

Spending and Taxation Overall Performance of the economy

MONETARY POLICY The process by which the monetary

authority of a country controls the supply of money.

Types of monetary policy

Expansionary- increases the total supply of money in the economy more rapidly than usual

Contractionary-expands the money supply than usual or even shrinks it.

Goals of Monetary Policy

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

Fiscal policy

Government policy of changing its taxation and public expenditure programs intended to achieve its objective.

Importance of fiscal policy

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.

The tools of fiscal policy

Public ecpenditure-revenue expenditure-capital expenditure

Pulbic revenue-Capital Receipt-revenue receipt -non-tax -tax - Direct and Indirect tax

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

Types of commercial policy

Free trade policy Protectionist trade policy

TOP 10 COUNTRIES IN THE WORLD WITH HIGHEST EXPENDITURES(%

GDP 2013) (source: http://data.worldbank.org/indicator)

1. NAMIBIA 27.6

2. DENMARK 26.7

3. NETHERLANDS 26.3

4. SWEDEN 26.2

5. SEYCHELLES 25.6

6. FINLAND 24.9

7. BELGIUM 24.4

8. ICELAND 24.3

9. FRANCE 24.1

10. SOUTH SUDAN 23.0

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

Summary of Allocations:Source: budgetngbayan.com by Department of Budget and Management

Budget by Sector

Budget by Expense Class

Budget by Region

Budget by Department and Special Purpose Fund

Budget by Sector

http://budgetngbayan.com/summary-of-allocations/ 2012Budget ng Bayan, a project of theDepartment of Budget and Management. http://www.gov.ph/- official gazette

Budget by Expense Class

http://budgetngbayan.com/summary-of-allocations/ 2012Budget ng Bayan, a project of theDepartment of Budget and Management. http://www.gov.ph/- official gazette

Budget by Region

http://budgetngbayan.com/summary-of-allocations/ 2012Budget ng Bayan, a project of theDepartment of Budget and Management. http://www.gov.ph/- official gazette

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

Problems in Government Expenditures

Time lagsa delay between an economic action

and a consequence.There may be a considerable time-lag between spending and the benefits that arise.

Higher Debt Interest PaymentsAs borrowing increases,the government

have to pay higher interest rate payments to those who hold bonds.

Inflationary PressureThe combination of quantitative easing

and very high levels of borrowing make inflation.

Crowding OutCrowding out can be defined at the

process of squeezing out the privately owned manufacturing sector by the expansion of the public sector.

Trade-offsThere is a potential trade off between

unemployment and inflation.

Higher taxes in the futureThe government will need to reduce

borrowing as a % of GDP. It means future budgets will need to increase taxes or limit spending.

Distribution of IncomeThe unequal distribution of household

or individual income across the various participants in an economy. It is often associated with the idea of income "fairness".

Solutions

Expenditure Planning Process -Formulating & creating spending process maintains conditions conducive to economic development.

Truth in Accounting-Truth in Accounting believes truthful accounting is the key for citizens, legislators, and the press to clearly understand the truth about government finances.

Balanced private & public sector spending-For economic growth both private investment and government expenditure should complement each other.

Interest Rate Manipulation-Maintaining low interest rates is another way governments seek to stimulate the economy, generate tax revenue and, ultimately, reduce the national debt.

Spending Cuts and raise Taxes-a combination of deep budget cutsand increase in Tax to reduce government debt.

Bailout-Getting rich nations to forgive your debts or hand you cash is a strategy that has been employed more than a few times

Monetary Policy-Monetary policy (Contractionary) is the most important tool for maintaining low inflation. Expansionary monetary policy also help attain full employment and equal income distribution.

Transfer payment -It is a redistribution of income in the market system or designating tax systems.

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