Public finances . They are made up of policies that implement public spending and taxes. The country’s economic stability and its income in deficit or surplus will depend on this relationship .
They have the objective of investigating the principles and forms that the public power must apply to obtain sufficient economic resources for the operation and development of the activities that it is obliged to carry out, which is above all the satisfaction of public services.
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- 1 Features
- 2 Public sector
- 3 Public expenditure
- 1 The expenditure budget
- 4 Public revenue
- 5 Related international financial organizations
- 6 Sources
Public finances are located within public financial law ( Tax Law ) from a legal point of view. Tax law is in turn an autonomous branch of administrative law that studies the legal norms that govern the financial activity of the state or other public power. Public finances are governed by administrative law.
As utility public finances are the technique by which the State implements the way to capture its economic resources (Income) to carry out its administrative functions and cover its planned public spending.
Public or state finance , as a ramification of political economy , uses positive propositions and normative propositions. The positives are derived from what is, was or will be. They are derived from facts, from reality. Its objective is to provide the State with economic means. The normative propositions that are used in public finances refer to what should be and, like other fields of knowledge, this subject is enriched with the current and evolution of economic thought, ethics and the new concepts of the human being.
The main state objective through public finances is usually the promotion of full employment and the control of aggregate demand. State intervention in finance, therefore, occurs through the variation of public spending and taxes. Public spending is the investment made by the State in different projects of social interest. In order to realize investments, that is, maintain public spending, the authorities must ensure that they collect taxes, which are paid by all the citizens and companies of a nation.
Public spending, on the other hand, can function as a stimulus for consumption. The State is in a position to create jobs, which will give people wages and money to consume.
Taxes are often linked to people’s income: the higher the income, the higher the taxes to pay. There are taxes that are considered recessive, since they affect the lower-income population and the upper classes in the same way.
At the birth of the Modern State, the public sector is constituted by a manager who executes the task of organizing and directing the public finances of a country. However, in the case of Latin America , a series of groups of countries are presented, ranging from neoliberal public policies to another set of more orthodox countries regarding state intervention in all strategic and priority areas of the economy. This through socialist nationalization policies.
All expenditures made by a government must generally be limited to what is stipulated in its laws derived from its constitutions, which generally establish that no payment may be made that is not specified in the budget or determined by law.
The expenditure budget of a country is an annual financial document that indicates the items in which public spending will be applied. For this, laws and regulations are prepared that specify the preparation, structure, execution and control of public spending.
In general, the laws that refer to the budget, accounting and public spending are structured according to principles of internal control .
The expenditure budget
The various items that make up public spending must be legally contained in the expenditure budget of each country, for which there is an obligation to publish it annually in the official government newspaper in turn.
Among the most important expenses of the State are those of the executive power of the country. That is, the expense of:
- The ministries or secretaries of state,
- The branches that comprise contributions to social security,
- Expenditures for regional development and participations to States or Departments, and Municipalities or Districts,
- The expenses of the legislature and the judiciary,
- The expenditures corresponding to the parastatal entities (government participation) and The expense assigned to the public debt of the federal government and of the parastatal entities.
- Consumption Expenses are those expenditures that are destined to the acquisition of goods and services and that do not increase production directly and immediately. Consumption expenses are mainly made up of the direct cost of administration and transfers for consumption.
- Investment Expenses are expenditures that are reflected in additions to fixed capital and inventories. They constitute an increase in wealth, since investment tends to increase production. To maintain a certain level of production, a proportional investment is necessary. A country’s investment spending comprises both private investment spending and public investment spending. Here public investment policy is decisive in the level of total investment.
- Effective Expenses are those expenditures that mean an outflow of monetary resources as opposed to virtual expenses that generally only mean accounting entries in books, without the actual transfer of money, as in the case of subsidies compensated with income, expenses with revaluations of assets, etc.
It is based on the idea that the individual, living under the protection of a sovereign state in a given territory, acquires the commitment to grant his respective government the power to impose the necessary contributions to cover the public spending of the society where he lives with his family and fellow citizens.
The income received by the government can be broadly classified into four important areas, which are:
- Tax revenue.
- Financial income.
- Rates and public services
- Public debt: The public deficit is the surplus of public expenditures over public revenues and originates when the public sector does not have the capacity to finance its expenses with revenues generated by it, that is, with its own revenues that are mainly represented by the tax policy of a country. The loans that the government of a certain country receives for deficit financing can be both internal and external, when they are internal they are called internal debt and when they are external they are called external debt, and both debts reflect the public debt as a result. total.