Prepared by:

JAN ARNEL LORIA

 Public Finance - means the collection
and spending of government funds.
- includes the collection
of taxes, the expenditure of government
money, the preparation of the budget,
the borrowing of foreign loans and the
floating of government bonds.
 Money – the life – blood of all nations
- no government can exist or
function without it.
 All activities of the government require
funds like the following:
• Education
• Defense
• Peace and order maintenance
• Health and sanitation
• Public works
• Social welfare
• Economic development
 Every system has 3 steps:
1) The preparation of the annual budget.
2) The enactment by legislature of the budget
(or appropriations) bill w/c provides for the
revenues and expenses of the government.
3) All government expenses are audited to
prevent extravagant or wasteful use of public
funds.
 Budget – a financial statement of the
estimated income and expenses of the
government for the coming fiscal year.
- comes from the French term
bougette meaning “purse”.
- how the government or anyone
earns and spends money.
AIM:
• Encourage systematic and wise use of public funds
• Stop extravagant or wasteful spending in the
government.
 Under the Constitution, the following rules are applied
to budget legislation
1) The President prepares the annual budget consultation
with the other government offices.
2) All budget and revenue or tariff bills shall originate in
the House of Representatives.
3) Congress may not increase the budget proposed by the
President.
4) The budget shall be specific, and appropriation items
must refer to specific purposes.
5) A special appropriations bill shall specify its purpose
and must be certified by the National Treasurer that
funds are available for it.
6) No transfer of funds may be made, however, the
President, Senate President, House Speaker, Chief
Justice and heads of the Constitutional Commissions
may augment any items in their respective offices.
7) Discretionary funds shall be supported by appropriate
vouchers.
8) If Congress has failed to pass a budget for the next
fiscal year, the budget for the preceeding year shall
remain in force.
9) The President may veto any particular item in the
budget bill.
 The government derives its income from the
following sources:
 Taxes paid by the people
 Incidental income
 Earnings and other credits
 Receipts automatically appropriated
 Extraordinary income or transfers of funds from special
sources (e.g. foreign loans, foreign aid, etc.)
 Residence tax
 Income tax
 Real property tax
 Inheritance and gift taxes
 Import duties or tariffs and dues on goods coming into
the country
 Licenses and business taxes
 Miscellaneous taxes (e.g. gasoline tax, bank interest tax,
energy tax, etc,)
 Fines and forfeitures and sales of public domain

 Service fees (motor vehicle, registration fee, court fees

and costs, alien registration fee, fiber inspection fee, etc.)
 Receipts from sweepstakes ticket sales
 Income from rentals of public property
 Fees paid for verification of private land surveys
 Fees paid for air mail service
 Fees paid to the different government board examiners
for various professional services (law, medicine,
engineering, etc.)

 Foreign loans secured by the government from abroad

 Government bonds
 Foreign aid given to the government
 The taxation power of the government is limited by the
following rules:
1) The tax shall be for a public purpose. Funds collected
from taxes are public money and must never be used to
enrich public officials or their families and friends.
2) The taxes shall be uniform and fair. Those whose
income is greater shall pay a higher income tax than
those whose income is smaller. There shall be no
exceptions to the payment of taxes.
3) Congress cannot tax properties which are used for
religious, charitable and educational purposes, such as
churches, cemeteries, orphanages and private schools
or universities.
 The government is like a family – it has to spend money
for its members and to run the household.
 Only the government’s expenses is not like a family
because it runs into billions of pesos.
 In fact, the government still has billions of loans to pay
because many times it has to borrow money to meet the
needs of running the country.
 Every year, the government expenditures increases.
1) Global inflation which reduced the buying power of the
peso
2) Population increase, which meant more schools and
teachers, more roads, hospitals and social services.
3) The rise in the price of oil from 1973 to 1984, which
made the other prices increase
4) The greed, graft and corruption of the previous
administration of President Marcos, his family and
cronies, who amassed vast sums of ill – gotten wealth
estimated at over $10 billion.
 President Marcos, who was in power from 1965 to 1986,
was the only national leader in the world who
singlehandedly borrowed a vast sum of money for his
country.
 The Philippines is now the 5th highest debtor country in
the world, after that of Brazil ($ 107billion), Mexico ($ 99
billion), Argentina ($ 50 billion), and Venezuela ($ 33
billion).
 The staggering debt of over $ 30 billion is a very serious
economic problem.
 The annual interest payment on this huge debt amounts
to about P126 billion alone, which is 40% of the national
budget.
 Although much of the money was stolen from the people
by the previous regime, the debt still has to be repaid,
otherwise the country cannot borrow more loans to
finance its economic development and budget deficit.
 Furthermore, if the Philippines does not repay these
loans, the country will be blacklisted by foreign
governments and foreign banks would not have lent us
the money if they did not believe in the capacity of our
country to develop.
 It is the policy of the government to honor these loans
but at more favorable terms of repayment than
previously given.