Sources of funds for the national government

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  • 1. SOURCES OF FUNDS for theSOURCES OF FUNDS for the National GovernmentNational Government
  • 2. Sources of Funds:Sources of Funds: 1. Tax Revenues 2. Non-Tax Revenues such as fees to be collected
  • 3. 2) borrowings from both domestic and foreign sources; and 3) withdrawals from available cash balances
  • 4. TaXTaX A tax is a compulsory contribution mandated by law and exacted by the government for a public purpose. The major tax collecting agencies of the national government are the Bureau of Internal Revenue and the Bureau of Customs.
  • 5. Tax revenues include the following:Tax revenues include the following:  Income taxes - Individuals Corporations Miscellaneous  Property taxes - Real property Property transfers Special assessments Special education tax Stock transfers Miscellaneous  Taxes on goods and services - Excises on imports Excises on domestic articles Business taxes and licenses Franchise tax Motor vehicle taxes Miscellaneous
  • 6.  Taxes on international trade and transactions - Import duties Export and premium duties Foreign exchange Miscellaneous  Other taxes - Documentary stamp taxes Charges on forest products Wharfage fees and charges Immigration tax Mining tax Community tax Miscellaneous - Local Government Shares on on Internal Revenue Collections Miscellaneous - Local Government Shares in the Proceeds from the Development and Utilization of the National Wealth Miscellaneous
  • 7. non-tax revenues are the following:non-tax revenues are the following:  Operating and service income - Government services Government business operations Interests Commissions Insurance/fiduciary bond premiums Rents Trading/production Miscellaneous
  • 8. Income from public enterprises/investments - Interest on loans Dividends on stocks Interest on bonds Interest on treasury notes/bills Interest on promissory notes Interest on receivables, acceptances and discounted notes Gain on sale of acquired assets/stocks/bonds Royalties Government share from toll fees and casino earnings Miscellaneous
  • 9.  Miscellaneous income - Sale of goods/merchandise confiscated Sale of scrap construction materials Gain on foreign exchange Contributions Inventory adjustments Sweepstakes Sale of waste materials Miscellaneous
  • 10. Sale of Assets - Public domain Fixed assets Gain on sale of fixed assets Scrap of fixed assets Intangible assets Investments/stocks/bonds Gain on sale of investments/stocks/bonds Grants and aids - From foreign countries From other levels of governments Domestic
  • 11. What are the desirable features of aWhat are the desirable features of a tax system?tax system? A tax system should be revenue- productive; simple and easy to administer, equitable, and progressive.
  • 12. What are the government's current efforts toWhat are the government's current efforts to improve tax collections?improve tax collections? The national government has continuously expended an all-out effort to strengthen its revenue-generating capability through legislative and administrative reforms. Recently, the government came up with a comprehensive measure to overhaul the tax system to bring in badly needed revenues for the government. Called the Comprehensive Tax Reform Program (CTRP), the new tax measure has three principal components, namely, a) income tax reform; b) excise tax reform; and, c) fiscal incentives reform. The CTRP aims to widen the tax base, simplify the tax structure to minimize leakages, undeclared revenues, overstated deductions and corruption to make the system more elastic and easier to administer.
  • 13. BorrowingsBorrowings Borrowings refer to funds obtained from repayable sources, such as loans secured by the government from financial institutions and other sources, both domestic and foreign, to finance various government projects and activities. The government borrows to provide for the requirements of capital projects and to support priority programs and projects. Relying solely on domestic resources will limit government’s capability to provide the needed support. Domestic resources is insufficient to finance priority programs and projects.
  • 14. domestic borrowings & foreigndomestic borrowings & foreign borrowingsborrowings Domestic borrowings are funds obtained from sources within the country. Domestic borrowings of the national government are usually made through the auction of treasury bills, notes and bonds to the public. Foreign borrowings, on the other hand, are funds obtained from sources outside the country, such as Asian Development Bank (ADB), International Bank for Reconstruction Development (IBRD), Overseas Economic Cooperation Fund (OECF), etc. Foreign borrowings can be obtained through loans secured from foreign financial institutions or through the flotation of government securities in the international market.
  • 15. Why does the government borrow?Why does the government borrow? The government borrows from any of the following reasons: to finance national government deficits; to obtain foreign exchange; to secure financing at more favorable terms than the opportunity cost of revenues; to take advantage of benefits attached to the funds, e.g. technology; and, to balance the timing of resources with the project gestation and repayment of benefit
  • 16. What are constructive cashWhat are constructive cash receipts?receipts? Constructive cash receipts are foreign loan proceeds in the form of goods and services for which no cash is remitted to the national treasury. Such goods or services have been paid directly by the lender to the supplier.
  • 17. DIMENSIONS OF THEDIMENSIONS OF THE BUDGETBUDGET
  • 18. The budget possesses various dimensions. It can be classified according to the following: By Sector, By Cost Structure, By Expense Class and By Object, By Region, By Type of Appropriation.
  • 19. A. By SectorA. By Sector The budget contains various type of expenditures. They are for: 1. Social Services Expenditure; 2. Economic Services Expenditure; 3. Defense Expenditure; 4. General Public Services; and 5. Debt Burden
  • 20. B. By Cost StructureB. By Cost Structure 1. For General Administration & Support Services or Overhead Expenses 2. As Support to Operations for the facilitative functions and services, staff and technical support 3. For Operations of regular activities addressing agency mandate Example: Production of goods, delivery of pubic services, and regulation, etc. 4. For Projects such as homogenous group of activities that result in the accomplishment of identifiable output within a designated period, whether foreign or locally funded
  • 21. C. By Expense Class & By ObjectC. By Expense Class & By Object 1. Current Operating Expenditures for personal services, maintenance and other operative expenses (MOOE) 2. Capital Outlays for investments, loans, livestock and crops, land/land improvements, buildings/structures, furniture/fixtures
  • 22. D. By Major Recipient ofD. By Major Recipient of GovernmentGovernment The major recipients of the budget are:
  • 23. 1. The NGAs (National Government Agencies) – they include all agencies with the Executive, Legislative and Judicial Branches of government 2. The LGUs (Local Government Units) – funding is released in the form of IRAs (Internal Revenue Allotments), special shares in national proceeds, credit thru the MDF (municipal development fund), and premium subsidies for local insurance
  • 24. 3. The GOCCs (Government Owned and Controlled Corporations) – funding is through subsidies, equity and net lending
  • 25. E. By Regional AllocationE. By Regional Allocation The Budget is apportioned for each of the various regions of the country.
  • 26. F. By Type of AppropriationF. By Type of Appropriation The budget is further classified into different types, namely: 1. General Appropriations 2. Supplemental Appropriations
  • 27. 3. Continuing Appropriations ◦ refer to appropriations available to support obligations for a specified purpose or project, such as multi-year construction projects which require the incurrence of obligations even beyond the budget year. Examples of continuing appropriations are those from existing laws such as : RA 8150, otherwise known as the Public Works Act of 1995; and Republic Act No. 6657 and Republic Act 8532 which set funds specifically for the Agrarian Reform Program (ARP). Currently, appropriations for capital outlays and maintenance and other operating expenses are considered as continuing appropriations but only for a period of 2 years. 4. Automatic Appropriations ◦ debt service-interest payments, the Internal Revenue Allotment or IRA which is the share of local government units (LGUs) from national government revenue and the Retirement and Life Insurance Premiums (RLIP) which is the share of the national government in the premium payments to GSIS for the life insurance and retirement benefit fund of government employees.
  • 28. The budget may increase or decrease depending on the government’s policy of how much it will infuse into the economy. Maturing of a country’s debt determines the size of the budget.
  • 29. Obligations Budget vs. Cash BudgetObligations Budget vs. Cash Budget Obligations budget are for expenditures incurred for the year and is to be paid in said year. This can also be for expenditures incurred for the year to be paid next year. Aside from this, it is also allocated for interest payments. Cash budgets are for expenditures incurred for next year. It can also be allocated for expenditures in previous years, and is also allocated for interest payments.
  • 30. Priority Development Priority Development  Assistance Fund (PDAF)Assistance Fund (PDAF)
  • 31. PDAFPDAF The Priority Development Assistance Fund  is a lump-sum appropriation in the annual General Appropriations Act to fund the priority development programs and projects of the government .
  • 32. PDAFPDAF is used to finance priority development programs and projects identified by the Members of Congress
  • 33. For the LGU, the amount is released to the Department of Budget and Management as the fund administrator, which in turn releases the corresponding amount to the LGU beneficiary of the programs and projects chosen by the legislator
  • 34. How Pork Barrel is createdHow Pork Barrel is created
  • 35. How Pork Barrel is createdHow Pork Barrel is created Step 1: PREPARATION Budget Call Out ◦ The Executive calls out all government agencies and departments to submit a budget for the next year ◦ Departments and their line agencies submits their budget ◦ Setting of overall budget policy ◦ Agency-level budget formulation ◦ Executive review, deliberation and approval ◦ Preparation of budget documents and submission to Congress
  • 36. Step 2: Authorization: ◦ Prepared budget is transmitted to Legislative Department for review and approval ◦ A Bicameral Committee Conference will be held At this point, Members of the House of Representatives insert some PDAF line items and intelligence funds to some departments and agencies Approval of the Budget (General Appropriations Act)
  • 37. Step 3: BUDGET EXECUTION ◦ The GAA serves as the legal basis which allows for the use of funds from the national treasury for specified expenditure items provided therein. However, the existence of a GAA alone does not imply that agencies can start utilizing and drawing funds to finance their programs and activities. Agencies need to secure an allotment to be able to obligate amounts specified in their budgets; cash allocation should also be secured before disbursements can be made to settle these obligations. The budget execution phase is concerned with these operational aspects of budgeting which facilitates the translation of appropriations to disbursements, or more specifically the release of funds through allotments and Notice of Cash Allocation (NCA).