PUB FIN MODS 1-2

• Although taxation has a long history, it played a relatively minor role in the ancient world
• Early Roman forms of taxation

  • Consumption taxes
  • Customs duties
  • Certain "direct" taxes
• Tributum


  A head tax paid by citizens, later extended to real estate holdings
• Centesima rerum venalium


  A 1 percent general sales tax introduced in the time of Julius Caesar
• The provinces relied for their revenues on head taxes and land taxes</b>
• Rome had an inheritance tax of 5 percent, later 10 percent, but close relatives of the deceased were exempted
• For a long time tax collection was left to middlemen, or "tax farmers," who contracted to collect the taxes for a share of the proceeds; under Caesar collection was delegated to civil servants
• Richard Abel Musgrave


  An American economist of German heritage, author of "The Theory of Public Finance" (1959)
• Public finance


  The study of the role of the government in the economy
• Purview of public finance

  • Efficient allocation of available resources
  • Distribution of income among citizens
  • Stability of the economy
• Public revenue


  Money received by a government from taxes and nontax sources to enable it to undertake government expenditures
• Taxes


  Monetary impositions on people for the use and enjoyment of benefits provided by government
• Non-tax sources


  Fees and penalties imposed on citizens for documents like licenses, certificates and other important official papers
• Public expenditure


  Spending made by the government of a country on collective needs and wants such as pension, provisions, security, infrastructure, healthcare, and other social services
• Public debt


  How much a country owes to lenders outside of itself, including individuals, businesses, and even other governments
• Financial administration


  A set of activities related to making available money to the various branches of an organization to enable it to carry out its objects
• Economic stability


  An absence of excessive fluctuations in the overall economy
• Major classes of tax revenue

  • Taxes on income and profits
  • Taxes on property
  • Taxes on domestic goods and services
  • Taxes on international trade and transactions
  • Other sources
• Private finance


  The money managed by an individual or a private entity, including the study of income, expenditure, borrowing, and financial administration
• Classifications of private finance

  • Personal finance
  • Business finance

  
• Functions of private finance

  • Investment
  • Risk management
  • Financing
  • Savings and wealth accumulation
  • Consumption and spending
• Similarities between public and private finance

  • Achieve financial security and satisfaction
  • Based on the principles of rationality
  • Limited resource at their disposal
  • Adopt policies for maximizing resources

  
• Differences between public and private finance

  • Private finance is the study of income, expenditure, and borrowings of an individual or corporate entity, with the objective of maximizing profit
  • Public finance is concerned with the revenue/incomes and expenditure, taxation and borrowings of the economy or government, with the objective of promoting social welfare

  
• Fiscal functions


  • Allocation
  • Distribution
  • Stabilization
• Fiscal functions of public finance

  • Price levels
  • Controlling inflation
  • Encouraging investments
  • Reducing regional disparities
  • Increasing industrial and/or agriculture output
  • Controlling consumption
  • Ensuring equal distribution of resources
• The main motive of the private sector is to earn profit, whereas the main motive of the public sector is to provide services to the public
• Both the public and private sector have a role to play, with the private sector being more efficient and better at job creation for general businesses without externalities, while the public sector provides education, healthcare and infrastructure investment

  
• The private and public sectors sometimes work together while promoting common interests, with the private sector leveraging governmental assets and resources while developing, financing, owning and operating public facilities or services

  
• Private sector


  Main motive is to earn profit
• Public sector


  Main motive is to provide services to public
• Both the public and private sector have a role to play
• Private sector


  • Likely to be more efficient and better at job creation for general businesses without externalities
• Private sector


  • Needs a good public sector to provide education, healthcare and infrastructure investment

  
• Private and public sectors

  Sometimes work together while promoting common interests
• Private-Public Partnerships (PPPs)


  Collaboration of public and private businesses to finance infrastructure for public use through private sources
• PPP examples


  • San Miguel Corporation establishing infrastructure like TPLEX, SLEX, MRT-7, New Manila International Airport in Bulacan
• Government expenditure


  Purchase of goods and services, including public consumption, public investment, and transfer payments
• Government budget


  Visible projection of political, social and economic policies
• Objectives of government spending policies

  • Re-allocating scarce and limited resources
  • Bringing down inequalities in earning and wealth
  • Paving way for economic stability
  • Managing public enterprises
  • Contributing to economic growth
  • Addressing regional disproportions
• There are perceived inequalities in the allocation of resources, with resources from Mindanao being exploited by urban areas