FISCAL POLICY : FISCAL POLICY WELCOME TO OUR PROGRAMME
-Some thoughts
FISCAL POLICY-Some Thoughts : FISCAL POLICY-Some Thoughts PRESENTED BY:
MUDASSIR IFTIKHAR (G.L)MB09053
M.USMAN MB09036
ZEESHAN MUNAWAR MB09060
M.IFTIKHAR MB09028
MUDASSIR NAZEER MB09033
Slide 4: MUDASSIR IFTIKHAR
MB090-53
CLASSICAL ECONOMIST : CLASSICAL ECONOMIST
JOHN MAYNARD KEYNES : JOHN MAYNARD KEYNES to the classical economists Challenged
Government in the Economy : Government in the Economy Nothing arouses as much controversy as the role of government in the economy.
Government can affect the macroeconomy through two policy channels:
Fiscal policy
Monetary policy
Fiscal Policy : Fiscal Policy
Overview : Overview The government has four primary objectives when it intervenes in the macro economy:
Promote full employment (high employment)
Promote price stability (low inflation)
Promote Economic Growth
Promote the Stability of Financial Markets
Fiscal Policy : Fiscal Policy The use of government spending and taxation to promote economy
According to Semuelson:“Fiscal policy is concerned with all those activities which are adopted by the government to collect revenues and make the expenditures so that economic stability could be attained without inflation and deflation” : According to Semuelson:“Fiscal policy is concerned with all those activities which are adopted by the government to collect revenues and make the expenditures so that economic stability could be attained without inflation and deflation”
ACTIVITIES OF THE STATE : ACTIVITIES OF THE STATE Collection of Revenues
Spending of Revenues
ACTIVITIES OF THE STATE ( cont.) : ACTIVITIES OF THE STATE ( cont.) Collection of Revenues
Taxes
Fees
Fines
Loan
Internal Loans
External Loans
ACTIVITIES OF THE STATE ( cont.) : ACTIVITIES OF THE STATE ( cont.) Spending of Revenues
Productive
Non-Productive
Slide 15: Productive Non-Productive
Dams Health
Roads Education
Mills Defense
Bridges Justice
Railways Social Security
Electricity Plants Embassies
Engineering unit Politics
Function with Monetary Policy : Function with Monetary Policy MP- implement by central Bank
FP - decision set by national government
influence
Regulate level of economic activity
BOP
Price level
FP affect MP : FP affect MP Impose consumer less less more supply
extra taxes have less spending demand and less demand
money
cheaper goods
inflation will start
lower SISTER’S STRATGY TO MP
TYPES OF FISCAL POLICY : TYPES OF FISCAL POLICY
Types of Fiscal policy : Types of Fiscal policy Neutral Fiscal policy
Expansionary/ Reflationary Fiscal policy
Contractionary / Deflatioary Fiscal policy
Neutral Fiscal policy : Neutral Fiscal policy G=T (Govt. spending = Tax Revenue)
neutral effect on economy
Expansionary Fiscal policy : Expansionary Fiscal policy G > T
T G
Contractionary Fiscal policy : Contractionary Fiscal policy G < T
T G
The Budget Deficit : The Budget Deficit A government’s budget deficit is the difference between what it spends (G) and what it collects in taxes (T) in a given period: With Expasionary fiscal policy
With Contractionary fiscal policy
Slide 24: MUHAMMAD USMAN
MB-09-036
INSTRUMENTS OF FISCAL POLICY : INSTRUMENTS OF FISCAL POLICY PUBLIC EXPENDITURES.
TAXES.
PUBLIC DEBTS.
1ST INSTRUMENT PUBLIC EXPENDITURES : 1ST INSTRUMENT PUBLIC EXPENDITURES 1. Government purchases of goods and services for current use.
2.Government purchases of goods and services intended to create future benefits.
3. Government expenditures that are not purchases of goods and services, and instead just represent transfers of money, such as social security payments.
GOVERNMENT EXPENDITURES IN BUDGET 2009-2010 : GOVERNMENT EXPENDITURES IN BUDGET 2009-2010
METHODS OF FUNDING : METHODS OF FUNDING Taxation.
Seignorage.
Borrowing money from the population, resulting in a fiscal deficit
Consumption of fiscal reserves
Sale of assets (e.g., land).
FUNDING THE DEFICITDEFICIT=E>R : FUNDING THE DEFICITDEFICIT=E>R A FISCAL DEFICIT IS OFTEN FUNDED BY ISSUING BONDS LIKE TREASURY BILLS.
CONSUMING THE SURPLUSSURPLUS=R>E : CONSUMING THE SURPLUSSURPLUS=R>E A FISCAL SURPLUS IS OFTEN SAVED FOR FUTURE LOCAL FINANCIAL INSTRUMENTS UNTILL NEEDED.
PAKISTAN DEFICIT FISCAL BUDGET 2009-20102.482 tn : PAKISTAN DEFICIT FISCAL BUDGET 2009-20102.482 tn ESTIMATED REVENUE 2.174 tn
ESTIMATED EXPENDITURE 2.89 tn
DEFICIT 722.5
GOVERNMENT SPENDINGS : GOVERNMENT SPENDINGS DISCRETIONARY MANDATORY
2ND INSTRUMENTTAXATION : 2ND INSTRUMENTTAXATION TAX IS A COMPULSORY CONTRIBUTION TO THE PUBLIC AUTHORITY TO COVER THE COST OF SERVICES RENDERED BY THE STATE FOR THE GENERAL BENEFITS OF IT PEOPLE
MAIN TYPES OF TAX : MAIN TYPES OF TAX Direct Tax
Indirect Tax
Progressive Tax.
Proportional Taxes.
Regressive Taxes TAX RATE BASE SHIFTABILITY
Kinds of Taxes : Kinds of Taxes CORPORATE TAX
ENVOIRNMENT AFFECTING TAX
EXCISE
INCOME TAX
PROPERTY TAX
SALES TAX
TARIFFS
TOLL
Slide 36: ZEESHAN MUNAWAR
MB09060
CANONS OF TAXATION : CANONS OF TAXATION Canon Of Equality
Canon Of Certainty
Canon Of convenience
Canon Of Economy
CANONS OF TAXATION : CANONS OF TAXATION Canon Of Productivity
Canon Of Elasticity
Canon Of Simplicity
Canon Of Diversity
TAX COLLECTION ORGANIZATION : TAX COLLECTION ORGANIZATION Canada Revenue Agency
Internal Revenue Service (IRS)
Her Majesty’s Revenue and Custom (HMRC)
Federal Board Of Revenue (FBR)
PURPOSES AND EFFECTS OF TAXATION : PURPOSES AND EFFECTS OF TAXATION On war
Enforcement of law and public order
Protection of property
Economic infrastructure
Public works
The operation of government itself
PURPOSES AND EFFECTS OF TAXATION : PURPOSES AND EFFECTS OF TAXATION Education systems
Health care systems
Unemployment benefits
Public transportation
THE FOUR "R"S OF TAXES : THE FOUR "R"S OF TAXES Revenue
Redistribution
Repricing
Representation
Slide 43: MUDASSIR IFTIKHAR
MB090-53
Objectives of the Fiscal Policy : Objectives of the Fiscal Policy Price stability
Objectives cont. : Objectives cont. Influence on consumption pattern
To raise the level of employment
Redistribution of income
Slide 46: Objectives cont.
Economic growth / development
Removal of deficit in BOP
Mobilization of resources
Increase in capital formation
Objectives cont. : Objectives cont. Degree of inflation
Social security
Encourage saving
Remove vicious circle of poverty
Limitation of Fiscal Policy : Limitation of Fiscal Policy Non-monetized economy
Lack of statistical information
Cooperation with the government
Large-scale tax evasion
Efficient administrative machinery
Slide 49: Mudassar Nazeer MB09033
Pakistan Fiscal Policy : Pakistan Fiscal Policy Since 1970
Last Budget
Who Present it
When Present it
Pakistan Fiscal Policy : Pakistan Fiscal Policy Total Budget
Deficit = Total Expenditure – Total Revenue
REMOVING OF DEFECIT : REMOVING OF DEFECIT INTERNAL LOANS
BISE and SLICOP
EXTERNAL LOANS
USA-UK-KSA-
IMF : IMF IMF Introduction
What is the function of IMF
IMF Terms And Condition : IMF Terms And Condition Tighten Money Supply
Removal of subsidies
Raise Taxes
Implementation of strong tax Policy
Implementation tax Policy on Agriculture
Do not spend on Defense
Drawbacks of IMF Loan : Drawbacks of IMF Loan A Large number of Drawbacks
Interference in govt.
Use of defence
Chairman of KCCI
Islamic Point of view : Islamic Point of view Equally Distribution Of Resources
Collect Zakat from rich
Islamic Sources of Revenue : Islamic Sources of Revenue Zakat
Ushar
Fitrana
Sadqat
Khaiarat
Slide 58: M.IFTIKHAR AHMAD
MB09028
Slide 59: Fiscal policy of Different Countries
Comparison of Fiscal Policy of Pakistan with : Comparison of Fiscal Policy of Pakistan with Australia
China
India
Fiscal Policy of Australia : Fiscal Policy of Australia Inflation targeting system
Supporting monetary policy
Fiscal Policy of China : Fiscal Policy of China 8% growth current year
€464 billion for domestic consumption
Still growing
India & PakistanA Comparison : India & PakistanA Comparison
Common Successes Shared by Both Countries : Common Successes Shared by Both Countries Doubling their per capita incomes
Lowering poverty (defined as $1 per day)
Improved food production
Food self-sufficiency
Common failures of both the countries : Common failures of both the countries Wasteful expenditures of resources
Issuance of licenses to inefficient private sector
Pre-planned allocation of resources
Poor judicial system
Lack of transparency in decision making
Common failures of both the countries (cont’d) : Common failures of both the countries (cont’d) Non-productive expenditures
Low check and balance
Large domestic borrowing
Heavy defense expenditures
Fragile banking system
The areas where India has surpassed Pakistan : The areas where India has surpassed Pakistan Scientific and technological development
Defense technology
Space search
Electronics
The areas where India has surpassed Pakistan (cont’d) : The areas where India has surpassed Pakistan (cont’d) Telecommunication
Population rate
Health access
The areas where Pakistan has surpassed India : The areas where Pakistan has surpassed India Higher economic growth
High per capita income
Strong export growth
Less poverty
Indo-Pak Comparison in 2010 : Indo-Pak Comparison in 2010
Indo-Pak comparison in 2010 : Indo-Pak comparison in 2010 Food
Water
Low-cost housing
Mass literacy
International terrorism
Slide 72: Mudassar Nazeer MB09033
NFC : NFC Allocation of Resources
Distribution of Resources
Unity of Provinces
NFC : NFC History (SUBCONTINENT & PAKISTAN)
First Time in Pakistan
Second Time
NFC Every time fail (Reasons) : NFC Every time fail (Reasons) Political Instability
Provinces Clashes
External Interference
External loans
NFCLast NFC Award : NFCLast NFC Award 7th NFC Award
Lahore
12th December 2009
Participation of provinces
NFCLast NFC Award : NFCLast NFC Award PM of Pakistan
CM of Punjab
CM of Sindh
CM of NWFP
CM of Balochistan
FM of Pakistan
NFC : NFC Federal part
Provinces part
NFC Part for Provinces : NFC Part for Provinces Punjab(53%)
Sindh(22%)
NWFP(16%)
Baluchistan(9%)
NFC : NFC Comments on NFC
Slide 81: MUDASSIR IFTIKHAR
MB090-53
Macroeconomic Framework Assumptions (2007-8 – 2016-17) : Macroeconomic Framework Assumptions (2007-8 – 2016-17)
GDP Growth Rate leading to rising trend in Per Capita Income : Per Capita GDP in $ GDP Growth Rate leading to rising trend in Per Capita Income Crossing $ 1000 per capita income Crossing $ 2000 per capita income Crossing $ 2000 per capita income
Pakistan’s economy : Pakistan’s economy Deficit budget
Slide 85: Where are we now?
Recent economic issues in Pakistan
Slide 86: Girl in search of water Man on the moon WE ARE DIFFERENT – A LOT OF SPACE TO COVER (1)
Slide 87: Child labour scavenging food WE ARE DIFFERENT – A LOT OF SPACE TO COVER (2)
Pakistan “zinda bad” : Pakistan “zinda bad”
Slide 95: Survival or Growth
?
Suggestions and Recommendations : Suggestions and Recommendations
Slide 98: –Road map Fiscal adjustment Monetary policy Keeping inflation under control Maintain a flexible exchange rate regime Strengthening the country’s physical and human infrastructure growth momentum Improving social indicators Maintain fiscal prudence by keeping fiscal deficit low
Slide 99: