DECENTRALIZATIONinThailand Fiscal Policy Bureau Fiscal Policy Office.
Fiscal policy of Pakistan 2013
-
Upload
danish-ali -
Category
Education
-
view
8.837 -
download
6
Transcript of Fiscal policy of Pakistan 2013
FISCAL POLICY OF PAKISTAN 2013
INTRODUCTION:
Fiscal policy is an important part of overall economic Framework of country.
The Fiscal policy is formed by Central Govn (Federal Govn)----Ministry of Finance.
DEFINITION:
• What is a Fiscal Policy? According to Samuelson Fiscal Policy is concerned with all those arrangements which are adopted by the Government to collect the revenue and make the expenditures so that economic stability could be attained/maintained without inflation and deflation.
Fiscal policy means the use of taxation, Public expenditure by the Government for purposes to “Stabilization” and “Development”.
“ACCORDING TO ARTHUR SMITH” Fiscal policy to refers the policy under which government
uses its expenditure and revenue program to produce the desirable effect of national income , production and employment.
COLLECTION OF REVENUE:
Taxes
Direct tax
Indirect Tax
Fees
Aids
Fines
Loan
OBJECTIVES OF FISCAL POLICY: Development of country
Expansion of Employment
Fixation of Govt Policy
Economic Growth
Controlling Inflation
Check imbalance the various sectors
Reduce inequality the income and wealth
Increasing the Investment
Optimum allocation of Resources
INSTRUMENT OR TOOLS OF FISCAL POLICY: Implementing the Fiscal policy of the Nation
Govt revenue
Expenditure
Budget
The Budget of the Govn is main instrument of the Fiscal Policy.
BUDGET:
The Estimated Revenue and Expenditure of he next year and the Future year of the Govt with specific time.
Fiscal policy involves the Revenue and Expenditure pattern to achieve the range of Economics Objectives.
METHODES OF RAISING FUNDS
Governments expenditure can be funded in a number of different ways:
Taxation of the population
Non Tax
Borrowing money from the population,resulting in a fiscal deficit.
External resources: Foreign grant and loans etc
TYPES OF TAXES
1) Direct:
Direct tax is the one paid directly to the Govt. By the persons on whom it is imposed
Income Tax, Property Tax, Capital Value Tax etc
2) Indirect:
It is collected by an intermediary(such as a retail store) from the person who bears the ultimate economic burden of the tax(such as the customer).
Sales Tax
REVENUES FROM TAX AND NON-TAX 2012 AND 2013
2012 2013
731.9 735.8
1320.91463.5
513.6
783.2
Comparison of Taxes in 2012 and 2013
Direct Tax Indirect Tax Non-Tax
Growth rate increased by 16.2% in 2013
Major part of this increase came from the rise in the non-tax revenues.
TOTAL REVENUE STRUCTURE IN 2013
COMMON ISSUE REGARDING COLLECTION OF TAXES Tax Evasion
It is an illegal practice where a person, organization or corporation intentionally avoids paying his/her/its true tax liability.
CAUSES OF TAX EVASION
People do not want to disclose their true income
Too many unlawful business activities such as drugs, hoarding, black money, etc.
No fear of punishment
Complex tax structure
Uncontrolled inflation and high cost of living
Low level of literacy among tax payers
Some economic sectors are exempted: Agriculture,real estate and capital gain
WEAKNESS OF TAX SYTEM
The principal reason lies in the structural weaknesses of Pakistan’s tax system which is:
Complex
Inefficient
Unfair
PRINCIPLES OF TAX POLICY
Lowering tax rates
Taxing all value additions including services,not just manufacturing sector
Establish an effective and efficient tax system.
Overcome the culture of tax avoidance and evasion
TYPES OF FISCAL POLICY
Expansionary:
An increase in government purchases of goods and services, a decrease in net taxes, or some combination of two for the purpose of increasing aggregate demand and expanding real output.
Aggregate demand= consumption+investment+Govt spending+net Exports
Contractionary:
A decrease in government purchases of goods and services, an increase in net taxes, or some combination of the two for the purpose of decreasing aggregate demand and thus controlling inflation.
FISCAL DEFICITFiscal deficit is the difference between the government’s expenditures and its revenues (excluding the money it’s borrowed). A country’s fiscal deficit is usually communicated as a percentage of its gross domestic product (GDP).
Fiscal Deficit=Govt. Spending –Govt. Earning
Causes of Fiscal Deficit
High Govt. Spending
Lower Revenue
Inflation
ECONOMIST’S OPINIONS
Economist John Maynard Keynes believed that deficits help countries climb out of economic recession.
On the other hand, fiscal conservatives feel that governments should avoid deficits in favor of a balanced budget policy.
FISCAL DEFICIT DIAGRAM(2009-2013)
FY09 FY10 FY11 FY12 FY130123456789
7.2
8.58
Fiscal Deficit
Budgeted Actual
BUDGETED AND ACTUAL ESTIMATES FOR 2013
EXPENDITURE COMPARISON 2012-13
FACTORS OF DEVIATION IN FISCAL DEFICIT The deviation from initial estimates was largely on account of three factors:
underestimation of subsidies
underestimation of interest payments
overestimation of FBR tax revenue.
WHY PAKISTAN IS FACING BUDGET SHORTFALL Increase in non-development expenditure
32%
68%
Interest & Defense Total Expanditure
32% Of the total expenditure is spend
on the Defense &
Interest Payments.
2011 2012 20130
100
200
300
400
500
600
700
800
900
1000
Defence Interest
Rs. In Billions
Increase in non-development expenditure
WHY PAKISTAN IS FACING BUDGET SHORTFALL(CONT.) Too many factories are closed or in partial production for
want of power and gas
Tax Evasion by well performing industries
Corruption by Tax Officials
Law and Order causing burden on the Expenditure side by way of compensation to the affected and mobilization to send forces to such areas.
HOW PAKISTAN CAN AVOID SURGE IN FISCAL DEFICIT? FBR should impose new taxes
Increase the price of utilities
Decrease in development spending
CONCLUSION
Pakistan fiscal position worsened because of unexpected events occurred on domestic and external scene.
High proportion of revenues being spent on defense and interest payments.
Lower industrial productivity leads to lower tax collection because of high interest rates.
Pakistan needs to increase tax base by imposing tax on agriculture and capital gain to increase revenue.