final Output

1. By: Rakim L. Perez BSBA 3B

2. Course Outline:
•What is Public Finance?
•Public Finance Cycle
• Formulation of Fiscal Policy
• Generation of Revenue from Taxation and Other Sources
• Revenues
• Tax
• Non-tax revenue
• Tax on income and profits
• Taxes on international trade and transactions
• Other taxes
• Major classes of tax revenues

3. Course Outline:
•Expenditures of funds through the National and Local
Budget
• Phases on budgetary procedures in National
• Budget Preparation and Presentation
• Budget Authorization and legislation
• Budget execution and operation
• Budget accountability
• Public Borrowing
• Accountability
• Government Budgeting

4. Course Outline:
•Deficit Financing
•Public Liability
•Role of COA
•Government Corruption
•Anti-Corruption

5. Public Finance
• Refers to the income and outgo of the governments in the
pursuit of national objectives.
• It involves the inflow of financial resources in the form of
taxes and other revenues, and the outflow of such
resources in the form of expenditure to finance goods and
services.

6. Public Finance Cycle

7. Public Finance Cycle
1. Formulation of Fiscal Policy

8. Fiscal Policy
•Fiscal Policy refers to policies on taxation, and other
revenue, expenditure, and borrowings which is
intended to promote the stabilization and
development of the economy.
•Now a days, “Fiscal and Monetary Policy” is used as a
single concept though it has a different aspect of
economic policy but have related impact.

9. Fiscal Policy
•The formulation of fiscal and monetary
policy made a huge part of economic and
social development but not limited to
socio-cultural and political.

10. Public Finance Cycle
2. Generation of revenue from taxation and other sources

11. Generation of Revenue
•Revenues refer to all cash inflows of the national
government treasury which are collected to support
government expenditures but do not increase the liability of
the NG.
•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.

12. Generation of Revenue:
Revenue Sources of Central Gov’t

13. Generation of Revenue:
Tax Revenue
◦Is the income that is gained by governments through
taxation.
Two Sources of Tax Revenue:
Direct Taxes
Indirect Taxes

14. Generation of Revenue:
Direct Taxes
◦ The term direct tax generally means a tax paid directly to the
government by the persons on whom it is imposed.
Sources of Direct tax:
Income Tax
Corporate Tax
Wealth Tax
Interest Tax
Securities Transaction Tax

15. Generation of Revenue:
Merits of direct Tax:
Equity Certainty
Creates Public Consciousness
Relatively Elastic
Anti-inflationary

16. Generation of Revenue:
Demerits of Direct Taxes:
Tax Evasion
Inconvenient
Narrow Coverage
Affects Capital Formation
Effects on Willingness And Ability to work

17. Generation of Revenue:
Indirect Taxes
◦Is one in which the burden can be shifted to others. The
Tax payers is not the tax bearer/. The impact and
incidence of indirect taxes are on different persons. An
indirect tax is levied on and collected from a persons who
manages to pass it on to some other person or persons on
whom the real burden of tax falls. For e.g. commodity
taxes or sales tax etc. are indirect Taxes.

18. Generation of Revenue:
Sources of Indirect Taxes:
◦ Central Excise Duties
◦ Customs Duties
◦ Service Tax
◦ Other Taxes and Duties
◦ Taxes of Union Territories
Merits of Indirect Taxes:
Universality
Influence on pattern of Production
Wide Coverage
May not affect Motivation to work and
Save
Social Welfare
Demerits of Indirect Taxes:
High Cost of Collection
Increase Income Inequalities
Lack of Social Consciousness
Affects Consumption
Inflationary

19. Generation of Revenue
•Non-tax Revenues refer to all other
impositions or collections of the
government in exchange for services
rendered, assets conveyed, penalties
imposed, etc.

20. Generation of Revenue
•Taxes on income and profits are imposed on all
taxable income earned or received by a taxpayer,
whether as an individual, as a partnership, or as a
corporation, during a particular period of time,
usually lasting one year. Taxes on domestic goods and
services are imposed on the use or sale of locally
manufactured goods as well as local services availed
of within the domestic territory.

21. Generation of Revenue
•Taxes on international trade and transactions include
import and customs duties, and other international trade-
related collections of the government. Taxes on property are
imposed on the ownership of wealth or immovable
property levied at regular intervals and on the transfer of
real or personal property.
•Other taxes primarily include collections from the motor
vehicles tax, immigration tax and forest charges.

22. Major Classes of tax Revenues
Other
sources
Taxes on
internationa
l Trade and
Transactions
Taxes on
Domestic goods
and services
Taxes on
property
Taxes on
income and
profits
Revenue

23. Public Finance Cycle
3. Expenditures of Funds through the National Budget

24. Expenditure of Funds- National Budget
•A budget is a plan of financial operation composed of
estimate or proposed expenditure for a given period
or purposed and the proposed means of financing
them.
•The principal activities of government are normally
controlled by a system Budget.

25. Expenditure of Funds- National Budget

26. Budgetary Procedures:
1. Preparation and Presentation
◦ This phase covers the estimation, determination and translation of
government revenues, priorities and activities.
◦ Government entities prepare their budgets for the year to be
submitted to the Department of Budget and Management (DBM)
for review.
◦ The DBM then consolidate all budgets to form a government
wide3 budgeting estimate, the ‘NATIONAL BUDGET’.
◦ This shall be submitted to the president for final approval.

27. Budgetary Procedures:
2. Budget authorization and Legislation
◦Involves the submission of the national government
budget to the legislative body for review,
deliberation, and formulation of an appropriation
bill to be forwarded to the president for approval
and signature.

28. Budgetary Procedures:
3.Budget Execution and Operation
◦Covers the implementation of the various
operational aspect of the budget.
◦Such as release of allotments to the various
agencies, the continuing review of the fiscal
position, and other related activities.

29. Budgetary Procedures:
4. Budget Accountability
◦Involves the evaluation of expenditures and
performance against the predetermined budget.
◦Obligation incurred, personnel used and work
accomplished are compared with the plans and
goals of various agencies submitted at the time
their respective budget is prepared.

30. Budgetary Procedures:
4. Budget Accountability
◦Accomplished by the heads of the various agencies
who review the performance of their respective
agency;
◦And the commission on Audit (COA) who examines
the operations of the agency.

35. Government Budgeting:
A budget deficit is incurred when expenditures exceed taxes
and other revenues for a year. And a budget surplus occurs
when all taxes and other revenues exceed expenditures for
a year. Though unbalanced means both surplus or deficit
budget, a number of economists refer to deficit budget as
unbalanced budget. Keynes has supported this principle
arguing that along with the higher government expenditure,
there will be multiplier effect in the economy.

36. Elements of Budget:
◦ Close to reality- despite being an estimate, it should be based on reality primarily on the basis
of the experience of the previous year.
◦ Simple and obvious- since this is a public document, all who are interested should easily get
the required information after looking on it.
◦ Flexibility- not only income and expenditure estimates are there but also the policies and
programs of the government. Thus, should have the quality of flexibility.
◦ Single fund- a single fund of the government should be established there for all revenues and
expenditures.
◦ Extensive- should be in detail about each item of revenue and expenditure.
◦ Publicity- it is made public and all the stakeholders are free to comment on this.
◦ Annularity- prepared for one year fiscal year.
Government Budgeting:

37. Government Budgeting:

38. Public Finance Cycle:
4. Public Borrowings

39. Public Borrowings:
Public 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.

40. Public Borrowings:
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 benefits

41. Public Borrowings:
•Public debt includes obligations incurred by the
government and all its branches, agencies, and
instrumentalities, including those of government
monetary institutions.
•It consists of all claims against the government which
may be payable in goods and services, but usually in
cash, to foreign governments or individuals or to
persons natural or juridical.

42. Public Borrowings:
Obligations maybe:
◦ Purely financial, e,i. loans or advances extended to the Philippine
government, its branches, agencies and instrumentalities;
◦ Services rendered or goods delivered to the government for which
certificates, notes or other evidence of indebtedness have been
issued to the creditor; and
◦ For external debt such as claims of foreign entities, securities held
in trust, non-bonded debts and obligations of the Philippines
government to the International Monetary Fund (IMF).

43. Public Finance Cycle:
5. Accountability

45. Functions Of COA
The Commission has the power, authority and duty to
examine, audit and settle all accounts and expenditures of
the funds and properties of the Philippine government.
Towards that end, it has the exclusive authority to define
the scope, techniques and methods of its auditing and
examination procedures. It also may prevent and disallow
irregular, unnecessary, excessive, extravagant or
unconscionable expenditures, or uses of government funds
and properties.

46. Role of COA
Examine, audit and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property owned or held in trust by, or pertaining to, the
government.
Promulgate accounting and auditing rules and regulations including those for the prevention
and disallowance of irregular, unnecessary, excessive, extravagant or unconscionable
expenditures, or uses of government funds and properties.
Submit annual reports to the President and the Congress on the financial condition and
operation of the government.

47. Role of COA
Recommend measures to improve the efficiency and effectiveness of government operations.
Keep the general accounts of government and preserve the vouchers and supporting papers
pertaining thereto.
Decide any case brought before it within 60 days.
Performs such other duties and functions as may be provided by law.
(Article IX-D of the 1987 Philippine Constitution)

48. Accountability
The Philippine Constitution emphasizes the
importance of accountability in the government.
Article XI simply and bluntly begins: “Public office is a
public trust,” before it adds that officials and
employees should serve the people with
“responsibility, integrity, loyalty and efficiency.”

49. Accountability
In the government budget cycle, accountability is laid down
by the need for government agencies and departments
submit to submit quarterly and monthly income
statements; statements of allotment, obligations and
balances along with other financial reports and documents
for audit - a formal process whereby the authenticity,
accuracy and reliability of financial accounts or transactions
are checked and approved.

50. Accountability
There are several kinds of audit:
◦ Financial Auditing wherein financial transactions and accounts are checked to ensure the
submitting government agency has complied with the rules and regulations, specifically the
pre-agreed and govern
◦ Performance Auditing whereby one is looking at the systems of the agency to assess it has
delivered on its institutional purpose and mandate by linking the budgets with results or
results-based budgets.
◦ internal audit, as the name suggests, an internal check on agency systems and processes.
◦ External Auditing involves an outside audit body being brought in to look at the agency.
◦ Pre-auditing refers to auditing by agencies before approval of transactions while post-
auditing is auditing by an independent body after.

51. Accountability
Government accountability agencies
◦The Philippine government has agencies mandated to
ensure accountability and transparency on its overall
operations. These agencies are: The Office of the
Ombudsman, Sandiganbayan, Presidential Anti-Graft
Commission, the Civil Service Commission and primarily,
for the purpose of this paper, the Commission on Audit.

52. Accountability
Office of the Ombudsman
The Office of the Ombudsman (Ombudsman) is mandated by the Constitution as
“protectors of the people who shall act promptly on complaints filed against
officers or employees of the government including members of the Cabinet,
local government units and government-owned and controlled corporations and
enforce their administrative, civil and criminal liability in every case where the
evidence warrants in order to promote efficient service by the government to
the people.”
The Ombudsman does not only cover officials and employees of the
government, but also private individuals who have participated or “in
conspiracy” with them in the filed complaints.

53. Accountability
Sandiganbayan
The Sandiganbayan, or the government’s anti-graft court, is mandated by the 1973 and 1987
Constitutions. It covers criminal and civil cases against graft and corrupt practices and other offenses
committed by public officers and employees with Salary Grade 27 and above, including those in local
government units and government-owned or controlled corporations, which are related to their
official duties as determined by law.
Presidential Anti-Graft Commission
The Presidential Anti-Graft Commission (PAGC) is mandated by Executive Order No. 12 to assist the
President in the campaign against graft and corruption. It investigates and conducts hearings of
administrative cases and complaints against Presidential appointees in the Executive Branch with
Salary Grades 26 and higher including members of the Armed Forces of the Philippines and Philippine
National Police of directed by the President, government-owned and controlled corporations and
public officers, employees and private persons in conspiracy with alleged public officials.

54. Accountability
Civil Service Commission
The Civil Service Commission (CSC) is the central personnel agency of the government and is tasked in
the recruitment, building, maintenance and retention of a highly-competent and professional
workforce. It is also one of the three independent commissions established by the Constitution with
adjudicative powers to render final disputes and personnel actions on Civil Service. It covers all
national government agencies, local government units and government-owned and -controlled
corporations.
Commission on Audit
The Commission on Audit (COA) is the constitutional commission mandated to be the supreme audit
institution of the government. It has jurisdiction over national government agencies, local
government units, government-owned and controlled corporations and non-government
organizations receiving benefits and subsidies from the government.

56. Characteristics of Corruption
Corruption always involves more than one person.
On the whole, it involves secrecy.
Entails mutual obligation and benefit.
Corrupt practices are usually given some legal justification.
It involves deception
In any form, it is a betrayal of the public trust.
It rests on a contradictory dual function.
It violates the duty and responsibility within the civic order.

57. The Philippine Setting
Corruption in the Philippines is endemic and metastatic
Income side: use of government power to extort money.
Expenditure side: malversation of public funds.
Some Dynamics:
◦ It encourages corrupt high ranking officials to remain corrupt.
◦ At the lower level, it frustrates younger officials
◦ The problem is so entrenched that it creates a vicious cycle with various naunces

58. Corruption
Philippines suffers from widespread corruption, means of corruption include graft, bribery,
embezzlement, backdoor deals, nepotism, and patronage.
According to a World Bank study in 2006, corruption in the Philippines is considered to be the
worst among East Asia’s leading economies and the country has sunk even lower among those
seen to be lagging in governance reforms. The 2009 Corruption Perceptions Index published by
global watchdog Transparency International, showed that the situation in the country had
improved slightly but still remained serious.
The Philippines ranked 3rd[citation needed] among 180 countries included in the index, up from its
previous 141st ranking in 2008. The nation scored 2.4 in the TI index, compared to 2.3 in 2008,
which ranked it equal to Pakistan, Bangladesh and the Baltic state of Belarus.[5]
Corruption exists in all levels of the government, especially among high-level civil servants,
according to the US Department of State Investment Climate Statement 2013.[6] Companies
generally have little confidence in the Philippine judicial system, and this is due to the allegedly
incompetent court personnel, corruption and long delays of court cases.[7]

59. Corruption
As of 2012, the Philippines came in at 105 with a 3.4 CPI in Transparency International's list that
ranks 176 (tied with Algeria, Armenia, Bolivia, Gambia, Kosovo, Mali, and Mexico), countries and
territories based on how corrupt their public sector is perceived to be.
This is better than the Philippines' 129th out of 178,ranking in 2011 with a 2.6 CPI, in
Transparency International's list. The CPI score indicates the perceived level of public sector
corruption on a scale of 0 - 10, where 0 means that a country is perceived as highly corrupt and
10 means that a country is perceived as very clean.
Transparency International-Philippines said some of the factors that contributed to the
Philippines' (2.6) slight jump are the improvement in government service, and cutting red
tape.[8]
The Philippines' corruption further declined in 2014 upgrading its ranking on Transparency.org
CPI from 94th to 85th in 2013 and 2014, respectively.

60. Corruption
There are several types of political corruption that
occur in local government. Some are more common
than others, and some are more prevalent to local
governments than to larger segments of government.
Local governments may be more susceptible to
corruption because interactions between private
individuals and officials happen at greater levels of
intimacy and with more frequency at more
decentralized levels.

61. Corruption
Types of Corruption found in Local Gov’t
Bribery is the offering of something which is most often money but can also be goods or
services in order to gain an unfair advantage. Common advantages can be to sway a person’s
opinion, action, or decision, reduce amounts fees collected, speed up a government grants, or
change outcomes of legal processes.
Extortion is threatening or inflicting harm to a person, their reputation, or their property in
order to unjustly obtain money, actions, services, or other goods from that person. Blackmail is a
form of extortion.
Embezzlement is the illegal taking or appropriation of money or property that has been
entrusted to a person but is actually owned by another. In political terms this is called graft
which is when a political office holder unlawfully uses public funds for personal purposes.

62. Corruption
Nepotism is the practice or inclination to favor a group or person who is a relative when giving
promotions, jobs, raises, and other benefits to employees. This is often based on the concept of
familism which is believing that a person must always respect and favor family in all situations
including those pertaining to politics and business. This leads some political officials to give
privileges and positions of authority to relatives based on relationships and regardless of their
actual abilities.
Patronage systems consist of the granting favors, contracts, or appointments to positions by a
local public office holder or candidate for a political office in return for political support. Many
times patronage is used to gain support and votes in elections or in passing legislation.
Patronage systems disregard the formal rules of a local government and use personal instead of
formalized channels to gain an advantage.

63. Corruption
The government is accused of bias in fighting corruption according to the Economists.
THE Philippine police had clapped two senators in jail by June 26th, 2014. Ramon “Bong” Revilla,
son of an ex-senator, and Jose “Jinggoy” Estrada, the son of an ex-president, were the first
senators to be arrested. The third facing prosecution is Juan Ponce “Johnny” Enrile, a veteran of
President Ferdinand Marcos’s regime. If convicted, they may face life imprisonment. All are
members of the opposition. They are accused of benefiting from the suspected embezzlement of
billions of pesos from the Priority Development Assistance Fund, known as the pork barrel. Each
year, the government used to give each of the 24 senators 200m pesos ($4.6m) from the pork
barrel, and each of the 290 congressmen 70m pesos. They were meant to spend it on
development projects. The effect was to give political dynasties the wherewithal to buy the
loyalty of generations of voters, and to give presidents the wherewithal to buy the loyalty of the
political clans. Last year the Supreme Court ruled the fund illegal, but only after a newspaper
exposed a scheme to funnel money from it to bogus NGOs, which would then give kickbacks to
politicians. Investigations cast suspicion on dozens of politicians, including some in government.

65. Anti-Corruption
The Coalition Against Corruption (CAC) is an alliance of the
academe, business sector, civil society organizations, and
Church that fights corruption. Launched on 21 September
2004, its mission is to implement and support counter-
corruption projects in the area of procurement reforms and
delivery of essential public services.
CAC’s goals are to strengthen public participation in
governance and to ensure proper use of public funds. The
projects supported by CAC include government procurement
monitoring, textbook and medicine monitoring, internal
revenue allotment (of barangays) monitoring, Priority
Development Assistance Fund (Pork Barrel) monitoring,
catching the big fish, and lifestyle checks on public officials.