Hseb Notes - Economics XI - Government Finance (Public Finance)

Meaning:

            Government finance is a branch of economics. In government finance, we study the financial aspect of government. Thus, government finance is the study of income and expenditure aspect of the government. Government finance is also called public finance. According to Dalton, “ Government finance is a science concerned with income and expenditure of the public authority.”

Government Revenue (Income):

Meaning:

            Government revenue is an important part of public finance. Government Revenue refers to the income of a government from various sources. In the past the function of state was limited. At that time the government revenue had not given more importance. But at present, the government has to play an important role in providing social services and economic services to the people. Therefore, Government revenue is very important in present days.

Sources of Government Revenue:

            There are two measure sources of government revenue i.e. Tax revenue and Non. Tax revenue.

1. Tax revenue:

Tax is a measure source of government revenue of Nepal. Taxes are compulsory payment to the government without the expectation of direct benefit to the tax payer. It contributes about 80 % of the total revenue collected in Nepal. The tax revenue inputs the following sources:

1. Custom:

It is collected at custom point located at the border of the nation. It includes export tax & import tax. It contributes about 35 % of the total tax revenue of Nepal.

2. Tax on consumption and production of goods & services:

It includes exercise duty, sales tax, VAT, contract tax, road tax, air flight tax, etc.

3. Tax on property, profit and income:

This source includes income tax, vehicle tax and tax on interest.

4. Land revenue and registration:

It includes land tax and land and house registration charges.

2. Non-tax revenue:

The Non-tax revenue contributes about 20 % of the total revenue of Nepal. The non – tax revenue includes the following sources:

1. Charges, fees and fines:

This source includes firm and arms registration, vehicle license, judiciary, administrative penalty, etc. These source contributes about 4 % of non – tax revenue.

2. Receipts from the sale of commodities & services:

This source includes income from drinking water, irrigation, electricity, postal service, education, transport and agriculture.

3. Royalty and sale of fixed assets:

This source consists of royalty from mining, forest, mountaineering, etc.

4. Principle and interest payment:

This source consists of the loan repayment made and interest paid by the companies and corporations.

5. Gifts and grants:

Individuals and governments of various countries give gifts and grants to the government of Nepal. This is also an important source of non-tax revenue of Nepal.

Government expenditure:

            The expenditure made by the government for the welfare of the people is called government expenditure. In other words, government expenditure of public authorities i.e. central, state and local government. These expenditures are made to protect the citizen and to promote economic development.

Classification of Government expenditure:

            The government expenditure of Nepal can be classified into two measure heading:

• Regular expenditure
• Development expenditure

• Regular expenditure:

The expenditure made on general government services is called regular expenditure. These expenditures are also called administrative expenditures. These expenditures are recurring in nature. These expenditures include the following heading:

• Constitutional organs:

It includes expenditure made on Supreme Court, election commission, public service commission, etc.

• General administration:

It includes expenditure made on council of ministries, various ministries, various departments, police, jail, etc.

• Revenue administration:

It includes expenditure made on the collection of land revenue, custom office, excise department office, VAT department, etc.

• Economic administration:

It includes expenditure made on planning commission, department of statistics, etc.

• Judicial administraton:

It includes expenditure made on courts.

• Defence:

It includes expenditure made on defence i.e. army.

• Social service:

It includes expenditure made on education, health, drinking water, etc.

• Economic services:

It includes expenditure made on agriculture, irrigation, transport, communication, electricity, etc.

• Development expenditure:

The expenditure which promote economic development is called development expenditure. This expenditure is also called capital expenditure. This expenditure is productive in nature. It includes the following headings:

• Constitutional organs:

It includes expenditure made on infrastructure development of Supreme court.

• General administration:

It includes the expenditure made on administrative reform of the government organization.

• Economic administration and planning:

It includes expenditure made on planning and statistics of the country.

• Social service:

It includes expenditure made on infrastructure development of education, health, drinking water, etc.

• Economic services:

It includes expenditure made on infrastructure development of agriculture, industry, transport, communication, electricity, etc.