FISCAL POLICY

Lourdes Anne Labanancia-Manapat

FISCAL POLICY

 Refers to the “measures” employed by governments to

stabilize the economy, specifically by manipulating the
levels and allocations of taxes and government
expenditures.
 Fiscal measures are frequently used in tandem with
monetary policy to achieve certain goals.
TYPES OF FISCAL POLICY

 Expansionary is an increase in government spending or a

decrease in taxation

 Contractionary is a decrease in government spending or an

increase in taxes
SOURCES OF PUBLIC FUNDS

 Tax Revenues are compulsory charges or levies imposed by government

on goods, services, transactions, individuals, entities and
others
are collected from sources other than compulsory tax
 Non-Tax levies, including those collected for direct services
Revenues rendered by government agencies to the public

– refers to funds obtained from repayable sources, such

 Borrowings as loans secured by the government from financial
institutions and other sources, both domestic and
foreign
USES OF PUBLIC FUNDS

 Provide economic services and employment opportunities

for our people.
 Strengthen social services like education, health, social
securities and welfare.
 Improve delivery of basic services and general public
administration
 Promote peace and order throughout the land.
Government Budget

 an annual financial plan of the government revenue and

expenditure
 statement of the financial plan of the government
 instrument through which the government controls the
entire economy
Qualities of a Good Budget

 Responsibility
 Comprehensiveness
 Flexibility
 Reliability
 Integrity
Components of Government Budget
receipts & Receipts which create
expenditure on capital a liability or result in
account projected for a reduction in assets
the next financial
year Capital
Receipts
Capital
Budget projected
Capital expenditure
taxes which have to be
Expenditure paid by the person on
consists of the income received whom they are levied
the incomes which are
from different taxes and other
Government received by the
duties levied by the government Direct Tax
Budget government from all
sources in its ordinary
course of governance Tax Revenue
Revenue those taxes which are
Indirect Tax levied on commodities
Receipts
Revenue Non-Tax and services and affect
Budget Revenue the income of a person
Revenue through their
Expenditure receive revenue from other consumption
includes the revenue non-tax sources expenditure
receipts of the incurred for the routine, usual Fees, Fines and Penalties,
government i.e. and normal day to day running of Profits from Public Sector,
revenue collected by government departments and Gifts and Grants, Special
way of taxes & other provision of various services to Assessment Duty
receipts citizens.
GOVERNMENT SPENDING (expenditure)

 includes all government consumption,

investment, and transfer payments.
TYPES OF EXPENDITURE

 Government acquisition by governments of goods and services for

current use, to directly satisfy the individual or
Final collective needs of the community
Consumption
Expenditure

(Gov’t Gross Capital Formation) acquisition of goods and

 Government services intended to create future benefits, such as
Investment infrastructure investment or research spending
GOVERNMENT BORROWING

 Refers to the borrowing by a government from within the

country or from aboard.
 total amount of money that a country's central
government has borrowed to fund its spending on public
services and benefits
OBJECTIVES OF GOVERNMENT BORROWING

 To maintain the balance between revenue and

expenditure
 To finance public welfare program
 To curb inflation
 To meet unexpected expenses
 To finance economic development
 To finance public sectors
TYPES OF GOVERNMENT BORROWING
Central Bank

Portion of the debt owed

to our own citizens
Commercial
Bank
Internal
Borrowing Non Banking
Financial
Institution

Borrowing Individuals

loan from the external

sources Foreign
government
External
Borrowing International
Financial
Institutions
BALANCE OF PAYMENT

 is a summary of the economic transactions of a country

with the rest of the world for a specific period.
 serves as an accounting statement on the economic
dealings between residents of the country and non-
residents
Instances of residency/non-residency:
 An Overseas Filipino (OF) can remain a resident of the Philippines or
can become a non-resident depending on the length of the job
contract abroad.
 A business enterprise is considered a resident of a country if it
engages, for a year or more, in the production of goods or services in
a significant scale in that country. Branches and subsidiaries of foreign
companies are treated as residents of countries where they operate
their business.
 a liaison or a representative office of a foreign company, regardless of
the length of its stay, does not qualify as a resident enterprise. Its
presence in a country is not for operating a business but only for
providing auxiliary services to the parent company.
 Government instrumentalities like embassies, consulates, and military
establishments stationed abroad remain as residents of the country
they represent.
Economic Transactions under the
Balance of Payments
Financial
Current Account Capital Account
Account
• Trade in goods • Capital • Direct
• Trade in transfers and investment
services acquisition and • Portfolio
disposal of non- investment
• Primary produced
income • Other forms of
• Non-financial investments
• Secondary assets between
income residents and
nonresidents
• Grants and
donations
ASSET PRIVATIZATION TRUST

 is an office tasked by the government to sell the Non-

Performing assets and/or government-owned and
controlled corporations' to the private sector.
Laws Covered:

 Presidential Proclamation No. 50

 Republic Act No. 7181
 Republic Act No. 7661
 Republic Act No. 7886
PRINCIPLES OF TAXATION

TAXATION
 is the inherent power of the sovereign, exercised through
the legislature, to impose burdens upon subjects and
objects within its jurisdiction for the purpose of raising
revenues to carry out the legitimate objects of
government

TAXES
 are the enforced proportional contributions from persons
and property levied by the law-making body of the State
by virtue of its sovereignty for the support of the
government and all public needs
ESSENTIAL ELEMENTS OF A TAX
 It is an enforced contribution.
 It is generally payable in money.
 It is proportionate in character.
 It is levied on persons, property, or the exercise of a right
or privilege.
 It is levied by the State which has jurisdiction over the
subject or object of taxation.
 It is levied by the law-making body of the State.
 It is levied for public purpose or purposes
PURPOSE OF TAXATION

 Revenue or fiscal
 provide funds or property with which to promote the general
welfare and the protection of its citizens and to enable it to
finance its multifarious activities

 Non-revenue or regulatory
 a) Imposition of tariffs on imported goods to protect local industries.
 b) The adoption of progressively higher tax rates to reduce inequalities in
wealth and income.
 c) The increase or decrease of taxes to prevent inflation or ward off
depression.
THEORY OF TAXATION

 The power of taxation proceeds upon the theory

that the existence of government is a necessity;
that it cannot continue without means to pay its
expenses; and that for these means, it has a right
to compel all its citizens and property within its
limits to contribute.
BASIS OF TAXATION

 is found in the reciprocal duties of protection and

support between the State and its inhabitants. In
return for his contribution, the taxpayer received
benefits and protection from the government.
This is the so-called benefits received principle.
Internal revenue taxes imposed under the
NIRC
 Income tax
 Transfer taxes
 Estate Tax
 Donors Tax
 Percentage taxes
 Value Added Tax
 Other Percentage Taxes
 Excise taxes
 Documentary stamp tax
 Local/Municipal Taxes
 Tariff and Customs Duties
 Taxes/Tax incentives under special laws
 CLASSIFICATION OF TAXES

As to subject matter As to purpose As to who bears the

or object • General/fiscal/revenue tax burden
• Personal, poll or capitation tax • Special/regulatory tax • Direct tax
• Property tax • Indirect tax
• Excise tax

As to scope of the tax As to the determina- As to gradation or rate

• National tax tion of amount • Proportional tax
• Local tax • Specific tax • Progressive or graduated tax
• Ad valorem tax • Digressive tax rate
• Regressive tax
THREE BASIC PRINCIPLES OF A SOUND
TAX SYSTEM
Equality or
Administrative
Fiscal adequacy Theoretical
feasibility
justice
• It means that • ability to pay • It means that
the sources of principle tax laws should
revenue should • It means that be capable of
be sufficient to the tax burden convenient, just
meet the should be and effective
demands of proportionate to administration.
public the taxpayers
ability to pay.