Public finance

A region's inhabitants established a formal or informal entity known as the government to carry out a variety of tasks, including providing for social requirements like education and healthcare as well as protecting the populace's private property from outside threats.

If private markets were able to provide efficient outcomes and if the distribution of income were socially acceptable, then there would be little or no scope for government.

The existence of market failure provides an efficiency-based rationale for collective or governmental provision of goods and services.

[9] Externalities, public goods, informational advantages, strong economies of scale, and network effects can cause market failures.

In this view, public sector programs should be designed to maximize social benefits minus costs (cost-benefit analysis), and then revenues needed to pay for those expenditures should be raised through a taxation system that creates the fewest efficiency losses caused by distortion of economic activity as possible.

These concepts can be seen in ancient greece as well, although it was split into two categories there: on one hand the government was to provide for a theater in every city and works of art in the country side.

The first mention of a tax in Anglo-Saxon England dates back to the 7th century where it's specified that fines resulting from judicial cases should be paid to the king.

This food rent was not too dissimilar from the taxes imposed on serfs in Russia in the Middle Ages wherein they were to pay most of their produce and goods to the local lord.

In 1550 serfs were instructed to pay another tax called za povoz, which was imposed on those who refused to deliver the harvest from their fields to their master.

Later in the eighteenth and nineteenth century lords began having to pay a per capita tax for each of their peasants and were responsible for their well-being during times of famine.

Toward this time, public finance and interest in how governments were to utilize the money earned from taxes as well as how to provide for their state became increasingly common.

Adam Smith also advocated for the laissez-faire attitude, but also claimed that the government would need to take a more proactive role in protection, justice, and public works.

Following Adam Smith, several economists expanded on his ideas, or transformed them as in the case of Thomas Robert Malthus, who believed that tax-financed public works would be most effective, so long as it created greater demand for labor and commodities.

Government operations have the power to make, and the authority to enforce rules and laws within a civil, corporate, religious, academic, or other organization or group.

Its significance arises not only from the fact that it is by far the most important of all revenues but also because of the gravity of the problems created by the present day tax burden.

Taxation in a modern government is thus needed not merely to raise the revenue required to meet its expenditure on administration and social services, but also to reduce the inequalities of income and wealth.

The main focus of the GFSM 2001 is the general government sector defined as the group of entities capable of implementing public policy through the provision of primarily non market goods and services and the redistribution of income and wealth, with both activities supported mainly by compulsory levies on other sectors.

The general government sector, by convention, includes all the public corporations that are not able to cover at least 50% of their costs by sales, and, therefore, are considered non-market producers.

It is an improvement on the prior methodology – Government Finance Statistics Manual 1986 – based on cash flows and without a balance sheet statement.

The memorandum items of the balance sheet provide additional information on the debt including its maturity and whether it is owed to domestic or external residents.

The revenue accounts are divided into subaccounts, including the different types of taxes, social contributions, dividends from the public sector, and royalties from natural resources.

[26] Social fairness includes the equal access of the various groups forming society to the financial resources and opportunities in all areas.

This concept is ensuring that every individual, despite their socioeconomic condition, race, gender, and other qualities, get equal opportunities to benefit from public services that relate to health, education, and social welfare.

These principles and strategies might very well make public finance one of the strongest allies for social equality—one where everyone has, under any circumstance, fair chances for success and participation in the benefits provided by society.

This achieved through techniques such as the "veil of ignorance," which would be applied to make sure that policy makers design systems without any bias based on their personal characteristics, such as race, income, or place of residence.

[30] In practice, successful involvement of social equity in public finance often requires a focus on specific demographic groups most affected by disparities, such as those differentiated by race, socio-economic status, or geographic location.

Local governments may, in this way, bring equity by being able to customize public services and even distribution of resources to those groups, effectively dealing with the systemic inequalities.

Success, on the other hand, calls for involvement from the stakeholders and effective governance that takes into account long-term planning and sustainability.

Local governments can measure through such indicators the efficiency of their efforts and performance in the allocation of resources from the budget to take care of the social disparities.

[32] In so doing, public finance may appear as a very strong lever that guarantees social equity based on the ability of all members of the community to gain respective fair access to the opportunities required for their well-being and success.