Short term strategies for financing budget deficit
Running down cash reserves
Use of open market operations e.g. sale of government bonds or securities,
Borrowing both locally and abroad.
This approach will expand the money supply and dr
A budget is statement which consists of the revenue and expenditure estimates of the
government for one particular year. The budget is an important instrument that every
government uses to define the direction of its national policy,
FACTORS AFFECTING TAXABLE CAPACITY
Number of inhabitants or population size.
The larger the number of inhabitant or population size, the greater the taxable
capacity of the country. This is the case at least in the absolute sense.
If incomes or wealth is
CLASSSIFICATION OF TAX
4. Proportional Taxes
A tax is proportional when the same rate of tax is applied to all tax payers, for example
the corporation tax which currently stands at 30% for all firms.
5. Regressive Taxes
A regressive tax is on
ROLE OF TAXATION IN ACHIEVING BUDGETARY
Taxation is the process of imposing compulsory contribution on the private sector to
meet the expenses which are incurred for a common good. The role of taxation in
achieving budgetary objectives includes
CLASSIFICATION OF TAXES
There are five major classifications of taxes. These are:
1. Direct Taxes
A direct tax is one whole impact and incidences are on the same person. The impact
of a tax is its money burden. A tax has impact on the person on whom it is
Advantages of Direct Taxes as opposed to indirect taxes
1. They are economical in collection. For example, with income tax the collection is done
though employers who are unpaid tax collectors.
2. Direct taxes, if progressive, can be made to fall equitabl
FISCAL POLICY REFORMS AND THEIR IMPACT ON GOVERNMENT REVENUE,
EXPENDITURE AND ECONOMIC ACTIVITES.
Fiscal policies are measures arrived at achieving desirable economic objectives by
the government. Fiscal policy is made up of: public debt, pu
A budget may be of two kinds:
Revenue budget relates to normal income and expenditure items while capital
budget relates to development projects. The main sources of revenue for the revenue
budget include:- Income and corpo
The incidence of a tax is the direct money burden of the tax. It deals with who
ultimately pays the tax.
From the illustration given above the incidence of the tax collected from the dealer
1. Wholly on the consumer if, as a direct resul
d. Pay interest on National debt
Taxes are also levied by the government to pay interest on national debt.
e. Optimum allocation of resources
Taxes are also imposed to allocate resources of the country for optimum use of these
Briefly explain the principle or canons of taxation
Define a direct tax and explain some of its benefits
Explain the Benefit Theory
This is the measure of an individuals ability to pay tax. There are two aspects fo
Absolute taxable capacity
This is the maximum amount of tax that can be collected form an individual or
TAX SHIFTING AND INCIDENCE FO A TAX
This is the transfer of the burden of a tax from the person on whom it is legally imposed to another
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