High Quality
Open the downloaded document, and select print from the file menu (PDF reader required).
International Journal on Governmental Financial Management – 2008 19
Fiscal and Budget ManagementSystem: Principles, Issues and Debates
Femi AborisadeCentre for Labour Studies (CLS)andDepartment of Business Administrationand Management StudiesThe Polytechnic, Ibadan, Nigeriacentreforlabourstudies1@yahoo.co.uk aborisadefemi@yahoo.com
Introduction
The budget is a government’s key financial plan. It should enable the government toachieve the main international objective of poverty reduction by ensuring that basicservices (including, health, education, water, housing, electricity) are available to allcitizens and that progressive taxation is used to fund these services and reduce the prevailing levels of inequality. This paper considers Nigeria as an example of a major developing country and considers the extent to which the government’s budgetary processis achieving these objectives. It also considers some of the major current debates aroundfiscal and budget management.The paper is structured as follows:
•
Definition of Key Terms – Fiscal Policy, Budget
•
Characteristics of a Good Budget
•
The Budget Cycle
•
The Roles of Progressive Legislators, Opposition/Civil Society Movements at EachStage of the Budget Cycle
•
Budget, Accounting Procedure and Fundamental Governance Principles
•
Political Loyalty And Accountability, Issues And Debates
o
Are Budget deficits to be avoided?
o
The Illegality of the Process of Increasing petroleum products’ prices in thedomestic economy
o
Ensuring Availability of Funds for Important Programs: Are governmentRevenue Projections Realistic?
o
Who Bears the Burden of A Tax?
o
Progressive Taxation
o
Tax Capital and the Rich
20 International Journal on Governmental Financial Management – 2008
o
Tax Competition
o
The Role of Independent Corrupt Practices and Other Related OffencesCommission (ICPC) in the Budget Process
o
The Role of the Economic and Financial Crimes Commission (EFCC) in theBudget Process
o
The Use of the Code of Conduct for Public Officers in Effective BudgetSystem
•
Conclusion
Definition of Key Terms
The key terms for this paper are fiscal policy and the budget. A discussion of these twoterms will allow us to begin an examination of the basic principles involved in budgetmanagement.
Fiscal Policy
Fiscal policy refers to the primary means by which government influences the economy interms of the aggregate levels of revenue and expenditure and the resultant surpluses anddeficits. Therefore, a ‘tight’ fiscal policy refers to government policy to restrain short termdemand by reducing public expenditure and raising taxes, which measure is intended torestrain inflation. An ‘easy’ fiscal policy on the other hand means a policy to stimulateshort term demand or economic growth by increasing government spending or reducingrevenues.A government sets and implements fiscal policy through the budget.
Budget
The budget is one of the most important documents of a government, which should besubjected to close public scrutiny and debate with a view to being positively influenced inthe interest of the poor. The budget is not only a technical document, which states expectedrevenue and expenditure; it is also a comprehensive statement of government policies,commitments and priorities in terms of social services that are planned to be provided.The fiscal year, which is government’s 12-month accounting period, may not coincide withthe calendar year. Ideally, the budget captures the totality of government financialtransactions, revenue to be collected, funds to be expended, debts (external and domestic)to be paid, new liabilities to be incurred, etc, so as to avoid situations of unexpected programs or commitments being ‘off-budget’ or outside the budget, which may causefinancial dislocation and bring about failure to attain set priorities or goals.There are two basic sides to a budget – estimates of revenue and expenditure. The major components of government revenue are tax revenue and non-tax revenue. Governmentsgain their revenue from taxes and other sources. Taxes may be direct or indirect. Directtaxes include income taxes on personal income and business profit tax. Indirect taxesinclude consumption taxes such as value-added, sales and trade taxes. Non-tax income
International Journal on Governmental Financial Management – 2008 21
may include grants from donors, income from natural resource extraction, marketing boardsurpluses, rent on government property, interest on loans, taxes on public utilities for supply of water, electricity, airfields, car parks, roads, docks, issuance of licenses and permits. If government revenue is not sufficient to finance its expenditure then the balancemay be borrowed from domestic or foreign sources. In Nigeria, the bulk of governmentrevenue, for Federal, State and Local Governments, comes from sale of crude oil.
Characteristics of a Good Budget
The characteristics of a good budget may be represented by the acronym, ‘
SMART
’.A budget should be:
•
S
pecific, e.g. building of schools, hospitals, health centre, bore holes, etc
•
M
easurable, e.g. two schools, to be built
•
A
chievable, e.g. will enable the government to provide the services required andachieve its agreed policy objectives
•
R
ealistic, e. g. within budgetary limits, which are known to the public and
•
T
ime-Related, i.e. time bound, e.g. two secondary classrooms to be built in the firsttwo months of the financial year The above characteristics should be used as a guide in assessing a government’s budgetary proposals sent to parliament in the form of Appropriation Bills or SupplementaryAppropriation Bills.
The Budget Cycle
The budget cycle consists of four stages:1.
Budget formulation stage
, i.e. the drawing up of the budget by the executive armof government2.
Budget Enactment stage
, i.e. the stage of debating, alteration and enactment intolaw by the legislative arm of government3.
Budget Execution stage
, i.e. the implementation of the budget as approved by thelegislature4.
Budget Auditing and Assessment stage
, i.e. the stage of auditing actualexpenditures and assessing them for effectiveness.
Add a Comment