role of public finance

During prosperity, the government imposes more tax and raises the internal public debt. (6) Industrial Development. Thus. The term “public finance“ may be defined as the identification of specific financial relationships and functions running between public administration bodies and institutions (i.e. The government uses the fiscal tools in order to bring increase in both aggregate demand and aggregate supply. Therefore, public finance has to play a special role of promoting economic growth in the developing countries besides maintaining price stability. The internal expenditures are reduced. (4) Reducing Inequalities. 2―Interpretation. Is Democratic Leadership Effective in All Situations? The Impact Of Democratic Leadership In The Organization, Situational Leadership Model: An Overview on Leadership Flexibility, The Core Leadership Skills You Need in Every Role You Play, Characteristics, Attributes and Traits of Charismatic Leadership, Important Elements to Include in Leadership Development Programs, Understanding The Importance of Executive Coaching, What Are The 9 Canons Of Taxation In Economics, 5 Canons of Public Expenditure | Principles of Public Expenditure, 4 Factors Of Production With Examples And Criticism, Accounting For Annual Leave Journal Entries. For this purpose, there must be policies in the store of the government to encourage people to save more by cutting their wasteful expenditure. It helps in promoting the export from the country and thereby earning the foreign exchange. The planning authorities fix the priorities of expenditure for the plan period. The responsibilities of the Treasury Division emanate from various laws and regulation. It may supply the inputs at the subsidized prices. Many PFM reforms involve the introduction of Integrated Financial Management Information Systems (IFMIS), often at substantial cost in financial outlays and administrative efforts. During recession, the case is just reversed. It has to keep peace, justice and security too. The principal of these are the Constitution of the Republic of Trinidad and Tobago (Chapter 8), the Exchequer and Audit Act (Chapter 69:01) and the Pension Act. The Government can levy Heavy taxes on the richer sections of the society because they have capacity to pay, and spend the income so received on providing various facilities to poorer sections of the society such as providing free medical facilities, educational facilities, cheap housing, Cheap rations through fair price shops etc. The tools are taxes, public debt, and public expenditure and so on. 6―Act to prevail in certain matters. (adsbygoogle = window.adsbygoogle || []).push({}); Government finance is important to achieve sustainable high economic growth rate. Get Tyrocity mobile app for your Android device, Address: ChadaniChowk, Tyanglaphat, Kritipur, Nepal, © TyroCity.com 2012-2020 All rights reserved. The government collects revenues and spends for the construction of infrastructures. During inflation, it reduces the indirect taxes and genera expenditures but increases direct taxes and capital expenditure. Public finance is the finance sector that deals with the allocation of resources to meet the set budgets for government entities. (3) Regulating Consumption Habits. 3―Object of this Act. Helps in Increasing Export. If there is high disparity it imposes more taxes on income, profit and properties of rich people and on the goods they consume. This branch of economics is responsible for the scrutiny of the meaning and effects of financial policies implemented by the government. The Government raises the necessary funds to implement the plans through direct and indirect taxation. Comparison of Authoritarian, Democratic and Laissez-faire Leadership. It plays a vital role in acquiring the financial resources needed by an economy to achieve its social welfare. 5―Declaration of entities as county government entities. It imposes more taxes on imports and so on. PART I—PRELIMINARY 1―Short title and commencement. Public finance as a concept may be understood on two levels – 1) as a practical activity of all components of public administration and 2) as a theoretical area. It revolves around the role of government income and expenditure in the economy. It collects internal public debt and mobilizes for investment… The capital formation, its speed and quantum will ultimately affect the economic development of the country. Public finance is crucial for the development of a nation as it deals with taxation and expenditure of different civic organizations. The amount is used to repay foreign debt and invention. The importance of public finance can be justified on the following grounds- (1) Protection to Infant Industries. (i) Governments grant Subsidies and grants to various industries these days to enable them to increase the production of different essential items. Prof. Dalton in his book Principles of Public Finance states that “Public Finance is concerned with income and expenditure of public authorities and with the adjustment of one to the other”. on the one hand it reduces the purchasing power of the richer sections and on the other hand, increases the purchasing power of the poor sections of the society. The government finance is important for proper utilization of natural, man made and human resources. Public Finance Definition Public Finance is the way of managing the public funds in the economy of the country which plays the most important role in the development and growth of the nation both domestically as well as internationally and it also affects every stakeholder of the country whether that stakeholder is a citizen or not. (5) Maintaining Balance or Trade: The Government always restricts the imports only to the essential items: hence imports of non- essential items are taxed heavily. Public finance helps industrial development of the country as follows-           . Public finance helps the government in raising efficient funds for promoting the various infrastructural facilities in the economy like road, railways, medical and educational facilities, etc. The money collected is used for the benefit of poor people through subsidies, allowance, and other types of direct and indirect benefits to them. In case of deflation, the policy is just reversed. (v) Industrial development of a country will bring in more employment opportunities to people especially in under-developed countries. The Government of an underdeveloped country protects its infant Industries against... (2) Planned Economic Development. The government uses the revenues and expenditures of itself in order to reduce inequality. (ii) Public finance induces the investment during the time of depression through its taxation policy by allowing tax-rebates for investments in desired direction. It reduces the burden on export items and also supports them with subsidies and grants. It collects internal public debt and mobilizes for investment. The government uses the revenues and expenditures in order to erase the gap between urban and rural and agricultural and industrial sectors. For all these things it uses the revenues and expenditures as fiscal tools. Abstract This paper focuses on the role of government finance in economic development. During inflation, it reduces the indirect taxes and genera expenditures but increases direct taxes and capital expenditure.

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