Professional Documents
Culture Documents
Taxation: An Introduction
(Public Finance)
Slide 1-2
Issues to be discussed:
Public Finance and the Type of Economy
Public Finance and Tax as a Source of
Public Revenue
Other Sources of Public Revenue vs.
Taxation
Public Finance vs. Private Finance
Importance of Public Finance
Slide 1-3
Slide 1-4
Slide 1-5
Taxation,
Printing currency,
Charging for public goods, and
Borrowing.
Printing Currency: Govt. is the only authority that can print currency as a legal
tender to finance its activities. But printing currency for additional financing is
often called as the debasement of the currency (or inflation tax), because it will
reduce the purchasing power of the currency and create inflation.
Charging for Public Goods: Govt. may charge for the goods and services it
provides. This is quite straightforward where the govt. operates like a
commercial business. However, where nonrivalry and non-excludability exist, it
would be very difficult, or even impossible, or very costly if possible, to charge
individuals directly on the basis of the use of many govt. services.
Borrowing: Govt. may raise money by borrowing. Govt. can borrow either from
their own citizens or from overseas. However, public debt (interest and
principal) has to be serviced and debt financing, therefore, adds to the future
budgetary commitments of the government authorities.
Taxation has its limits as well, but they considerably exceed the amounts that
can be raised by resorting to other three sources. So while govt. often use all
four methods of raising resources, taxation is usually by far the most important
source of govt. revenue, because of its characteristics in achieving govt.
financial, economic, political and social objectives.
Slide 1-6
Tax revenues
Nontax revenues:
1. Commercial revenue received in the form of prices
2. Administrative revenues:
i. Fees
ii. Licence Fee
iii. Special Assessment
iv. Fines and Penalties
v. Forfeitures
vi. Escheat (the claim of a government to the property of a person
who dies without having any legal heirs or without keeping a will)
Slide 1-7
Slide 1-8
Dissimilarities:
Point of Diff.
Public Finance
Private Finance
1. Income and
expenditure
policy
2. Sources of
revenues
3. Compulsory
acquisition of
resources
4. Forms of
borrowing
5. Rate of interest
on borrowing
Slide 1-9
Dissimilarities:
Point of Diff.
Public Finance
Private Finance
6. Creation of
currency
7. Principle of
financing
8. Budget
planning
9. Environmental
influence
Slide 1-10
Dissimilarities:
Point of Diff.
Public Finance
Private Finance
10. Relationship
between
expenditure
and welfare
11.Time period of
expenditure
12. Publicity of
income and
exp. account
13. Effect of
income & exp.
On individual family or at
best on relatives & friends
14. Provision of
insolvency
Slide 1-11
Slide 1-12
Thank you.