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Sources of Government Funds

Sources of Government Funds. T A X. Interest in Deposits BSP and Commercial Banks. Grants Foreign Government and Private Foundation. Sold Government Assets. Why is there TAX?. Protection. Welfare and Well-Being. LAWS Formulate, Implements and Interpret. Concepts on TAXATION.

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Sources of Government Funds

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  1. Sources of Government Funds

  2. T A X

  3. Interest in DepositsBSP and Commercial Banks

  4. GrantsForeign Government and Private Foundation

  5. Sold Government Assets

  6. Why is there TAX?

  7. Protection

  8. Welfare and Well-Being

  9. LAWSFormulate, Implements and Interpret

  10. Concepts on TAXATION

  11. Benefits Principle

  12. Ability to Pay Principle

  13. Kinds of TAXAbility to Pay

  14. Inheritance Tax

  15. Income Tax

  16. How TAX is paid

  17. Direct Tax

  18. Indirect Tax

  19. Progressiveness of TaxesTAX BURDEN

  20. IMPACT

  21. INCIDENCE

  22. MoreKinds of TAXTAX BURDENS

  23. Regressive

  24. Proportional Taxation

  25. Progressive

  26. FISCAL POLICY – THE Rappers Althea Rendal

  27. Topics • Measuring Income Distribution Equality • Uses of Government Funds • Income Determination and Government • New Equilibrium • New Multiplier • Automatic Stabilizer • Rigidity in Government Spending

  28. Measuring Income Distribution Equality

  29. Lorenz Curve • Shows what percentage of total income goes to the lowest 10% income class, the next decile and so on.

  30. Gini Index (Distribution of Family Income) • Philippines • 45.8 (2006) 46.6 (2003) • Singapore • 47.8 (2009) 48.1 (2008) • United States • 45 (2007) 40.8 (1997) • China • 41.5 (2007) 40 (2001 • Germany • 27 (2006) 30 (1994) • Hungary • 24.7 (2009) 24.4 (1998) • Namibia • 70.7 (2003) • Source: www.cia.gov The World Factbook,

  31. Use of Government Funds • Economic Services • Agricultural, trade and industry, power and energy, transport and communication sectors • Social Services • Education and Health Services • Defense • National Security • General Public Services • Government branches, departments, agencies • Interest Payments

  32. Income Determination with Government

  33. New Equilibrium • (1) Y = C + I + G • where : I and G are autonomous inflows • (2) C = b + c Y • where: Yd = disposable income and • (3) Yd = Y – T • Taxes depend on the level of income, so the tax function very similar to the savings function

  34. (4) T= s + tY • Where T= taxes • s = the level of taxes if y=0 • t = Marginal Propensity to Tax (MPT) Ex. The change in the level of taxes corresponding to a change in the level of income, or change in T/ change in Y

  35. Substituting, we get: • (5) Y = b + c (Y-T) + I + G • (6) Y = b + C [Y – (s + tY)] + I + G

  36. New Equilibrium with Govt and Taxes • (7) Y = 1 . X (b – cs + I + G) 1 – c + ct

  37. Example…

  38. New Multiplier • Multiplier (w/ G, T) = 1 . 1- c + ct

  39. Rigidity in Government Spending • Govt MUST Cut Down Spending • But WHERE? • There is always a TRADE OFF. • Address Debts • High Interest Expense • Minimize Corruption • Strong Political Will

  40. Relative In Taxation Flexibility

  41. OF FISCAL DEFICITS DEMAND and Output

  42. WAYS 1 2 DOMESTIC MONEY MARKET 3

  43. BORROWING FROM THE BSP

  44. BORROWING FROM THE DOMESTIC MONEY MARKET • Normal Route • Issuing Treasury Bills and Treasury Notes or other debt instruments • Crowding effect

  45. BORROWING FROM ABROAD

  46. FISCAL POLICY AND GROWTH

  47. TAXATION AND GROWTH Tax effort Tax Reform

  48. TAX EVASION - not paying taxes correctly - illegally

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