Public Expenditure

Revenue Expenditure and non revenue expendituRe Transfer Payments and expenditure on goods and services Development and non developmental activities

Effects of Public expenditure on distribution

1. Social Security measures: Unemployment insurance, sickness benefit and old age pensions 2. Expenditure on subsidies: food , sugar, kerosene , handloom etc. 3. Expenditure on social infrastructure 4. Expenditure on anti poverty programme 5. Encouragement to labor intensive industries 6. Negative TAX SYSTEM

Financing of government expenditure: Taxation

What is tax
It si a compulsory payment levied on the persons or companies to meet the expenditure incurred on conferring common benefits upon the people of country

Classification of taxes
Direct and Indirect Taxes Specific and advalorem Taxes Example: Air passenger duty Example of advalorem is VAT Progressive, Proportional and regressive Taxes

Principles of a good tax system

Canon of equality Canon of certainty Canon of convenience Canon of Economy

Characteristics of a good tax system

Productivity or fiscal adequacy Elasticity of Taxation Diversity Taxation as an instrument of economic growth Taxation as an instrument for improving Income distribution Taxation for ensuring Economic stability

Principle of equity in Taxation

Benefits received Theory Ability to pay Theory

Transfer Payments
In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income in the market system. These payments are considered to be exhaustive because they do not directly absorb resources or create output. In other words, the transfer is made without any exchange of goods or services.[1] Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses (firms).