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.
Public FinanceCycle Formulation of fiscal policyA process Generation of revenue Accountability from taxation and other sources Expenditure of Public funds through borrowings the national budget
Public FinanceThe FORMULATION OF FISCAL POLICY lies at the dead center of the democratic government. -E. Pendleton Herring, 1938
Public Finance Cycle1. Formulation of fiscal policy
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.
FISCAL POLICY Fiscal and monetary policy have been crafted in response to requirements of stabilization, and subsequently, and in accordance with the structural adjustment programs (SAPs) negotiated by the International Monetary Fund (IMF). On the other hand, monetary policy is generally understood to be that which influences the level of money supply in the economy.
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. Things to ponder: i. As a PA scholars how we are going to assist the government in reinventing fiscal and monetary policies to cope with the drive towards social and economic transformation?
Public Finance Cycle2. Generation of revenue from taxationand other sources
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.
Generation of RevenueNon-tax revenues refer to all other impositions or collections of the government in exchange for services rendered, assets conveyed, penalties imposed, etc.
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.
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.
MAJOR CLASSES OF Taxes on TAX REVENUES Domestic Goods and Taxes on Taxes Services International on Trade and Property Transactions Taxes on Other Income Revenue Sources and Profits
Generation of Revenue What are the governments current efforts to improve tax collections? i. The national government has continuously expended an all-out effort to strengthen its revenue-generating capability through legislative and administrative reforms. ii. 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)
Generation of Revenue What are the governments current efforts to improve tax collections? iii. 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.
Public Finance Cycle3. Expenditure of Funds throughthe National Budget
Expenditure of Funds - NationalBudget 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
Expenditure of Funds - National BudgetPHASES ONBUDGETARYPROCEDURES
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 wide budgeting estimate, The “National Budget”.• This shall be submitted to the president for final approval.
Budgetary Procedures:2. Budget Authorization andLegislation• 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.
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.
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.
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.
2011 National Budget the Development Budget Coordinating Committee (DBCC’s) recommendation of the budget for 2011 which has gone down from what was originally proposed which was P1.757 trillion then; President Noynoy Aquino has approved a budget of P1.645 trillion for 2011. 6.7 percent higher than 2010 Budget. The premised on a revenue assumption of 15.6 percent or in absolute terms, P1.410 trillion (Reference : http://www.dbm.gov.ph/dbm_publications)
2011 National Budget The Department of Education has been allocated P207.3 billion; Public Works and Highways, P110.6 billion; and National Defense has been allocated P104.7 billion. Interior and Local Government get P88.2 billion; Agriculture, P37.7 billion; Social Welfare and Development, P34.3 billion; Health, P33.3 billion; Transportation and Communications, P32.3 billion; Agrarian Reform, P16.7 billion; and Justice, P14.3 billion. (Reference : http://www.dbm.gov.ph/dbm_publications)
400 200 0 Department of… Public Works… Agriculture Social Welfare… Health Transportatio…Agrarian ReformSource: 2011 National Budget Allocation Justicehttp://www.dbm.gov.ph/dbm_publications
2011 National Budget Presidential Decree No. 1177 (PD 1177) which prescribes the budget process and provides for the automatic appropriation of, among other things, the debt service. This decree, promulgated by the late President Ferdinand E. Marcos during his autocratic regime and continue to dictates fiscal processes even under the present democratic system.
2011 National Budget Pnoy Administration continue to adopt measures to further bring down the expenditure as well as the deficit level. i. tighter allocations for government-owned and controlled corporations; ii. limits in the increases for utility, communications and supply expenditures; iii. a ban on the construction of new office buildings except classrooms and public health centers; iv. a ban on the acquisition of motor vehicles; v. a ban on new positions except those for teachers and uniformed and medical personnel; vi. and keeping contractual and casual employee levels
2011 National Budget Government revenues are expected to reach P1.41 trillion , with P940 billion coming from the Bureau of Internal Revenue (BIR), P320 billion from the Bureau of Customs (BOC), P6 billion from privatization and P144 billion from other revenue-generating agencies. Deficit is expected to reach P290 billion or 3.2 percent of GDP.
Privatization 2011 Nat’l BOC 320B 6B BudgetBIR 940B Others 144B Expect ed 1.41 T Approved Budget Expected Deficit 290B 1.645T or 3.2 GDP
Public Borrowings 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.
Public Borrowings The government borrows from any of the following reasons: i. to finance national government deficits; ii. to obtain foreign exchange; iii. to secure financing at more favorable terms than the opportunity cost of revenues; iv. to take advantage of benefits attached to the funds, e.g. technology; and, v. to balance the timing of resources with the
Public Borrowings Is the debt crises over? Government claims that debt crises is already over in the Philippines. Cited the following indicators; i. Total debt stock as a percentage of GNP and as a percentage of exports has been reduce. ii. The share of concessional debt to total debt stock had increased iii. Foreign exchange reserves have reached a comfortable level.
Public Borrowings Is the debt crises over? But as to the point of economist, they noted that it maybe true that debt as a foreign exchange problem is becoming manageable. Debt issue remains a fiscal policy problem, in view of the fact that debt payment continue to be a terrible burden of the budget.
Public Borrowings Right now, Japan is our No. 1 Bilateral creditor. Nearly 70% of the total official debt is owned to Japan. The country debt to Japan is growing rapidly now so much because of new loans but because of revaluation.
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.
Public Borrowings Obligations maybe: i. 1) purely financial, i.e., loans or advances extended to the Philippine government, its branches, agencies and instrumentalities; ii. 2) services rendered or goods delivered to the government for which certificates, notes or other evidence of indebtedness have been issued to the creditor; and iii. 3) for external debt such as claims of foreign entities, securities held in trust, nonbonded debts and obligations of the Philippine government to
Accountability Accountability is defined as a condition in which individuals who exercise power are constrained by external means and by internal norms. It refers to the institution of checks and balances in an organization thru which an administrator accounts for his stewardship of resources or authority. The political-administrative continuum means that elected officials are politically accountable to the electorate or their constituencies who voted them to their positions. These elected officials are held responsible thru regular elections and other means, i.e. recall and referendum. Appointive public officials answer to the people thru the elected officials who appointed them and directly to the public
Accountability Types of Accountability i. Individual accountability – public employees are answerable for the responsible, efficient and effective performance of their tasks. ii. Accountability of administrators – for their stewardship of the administrative authority, resources and information placed at their disposal as leaders of
Accountability Types of Accountability iii. Political accountability – of institutions that must answer for their organizational mandate and functions, particularly as they form part of the incumbent government strategy for national development. iv. Accountability of national leaders – elected national leadership must answer for the performance in pursuing their programs of government and their use of national resources, given the authority, power and
Accountability Philippine Administrative Structure i. Constitutional bodies: 1) constitutional commissions - CSC, COA, COMELEC; 2) constitutionally created/mandated special bodies – CHR and Ombudsman ii. Executive Departments iii. GOCCs (wholly-owned or at least 51%) iv. Chartered institutions (created by law) v. LGUs
References:PA in the Philippines: A Reader 2nd Edition (UPNCPAG)Philippine Administrative System (PAS) : Ma. Concepcion P.Alfiler, UP Open U Advance Accounting – Government Accounting System for NationalGovernment Agencies: 2011 Edition By P. Guerrerohttp://www.nscb.gov.ph/secstat/d_finance.asphttp://www.dbm.gov.ph/dbm_publications
A Process on Public Finance CycleReported by: Sherwin M. ArcipeLNU Dagupan City Prof. Jo B. Bitonio, DPA