Group Members Mudassir Inam. Muhammad Arsal. Wajahat Ali. Hammad Baig.

Topic: Fiscal Policy of Development

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. These two policies are used in various combinations to direct a country's economic goals.

Fiscal Policy

Development Country Expansion of Employment Economic Growth Controlling Inflation Increasing the Investment Reduce Inequality the Income and Wealth

Objectives of Fiscal Policy

A tax paid by directly to the government For exampleIncome taxIndirect Tax:A tax which is not deducted from income directly but is paid to someone

who then pay it to government For exampleSales tax

Taxation DirectTax :

Country Groups 1995-1997

Developed Countries 37.9

Developing Countries 18.2

According to IMF 2000

As you seen in table developed OECD countries generally relay ,more strongly on direct tax

Tax Revenue 1985-1997 as a percentage of GDP1995-1997

COUNTRY GROUPS DIRECT TAX INDIRECT TAXOECD COUNTRIES 14.2 11.4AMERICA 15.4 7.0PACIFIC 16.3 8.4DEVELOPING COUNTRIES

5.2 10.5

AFRICA 6.9 11.6ASIA 6.2 9.7MIDDLE EAST 5.0 10.3

Many developing countries face problems of

1. Large fiscal policy Deficits

2. Public expenditures (generally in excess of public revenue)

3. Rising debt burdens

4. Falling commodity prices

5. Growing trade imbalances

6. Declining foreign investments inflows

PROBLEMS

In general the taxation potential of a country depends on five factors.

The level of per capita real income

The degree of inequality in the distribution of that income

The social , political, and the relative power of different groups

The administrative competence, honesty, and integrity of tax gathering branches of government

The industrial structure of the economy

Factors

……….

Personal Income Tax (PIT) is a direct tax levied on income of a person. A person

means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate.

PERSONAL INCOME TAX

Property tax is a tax assessed on real estate. The tax is usually based on the value of the property (including the land) you own and is often assessed by local or municipal governments.

PROPERTY TAX

Corporate income taxes are levied by the U.S. Federal

government and by states on business profits. Understandably,

companies try to use everything in the tax code to lower the cost

of taxes paid by reducing taxable income.

Source of developing countries. Direct and indirect tax. Import and export.

Indirect tax on commodities

Tax rate

Filers and non filers. Unknown about process. Key technology. We must consider optimal tax system rather than ,optimal taxes

(joil slemrod).

Problems of tax administration