Advanced Public Finance & Taxation: Ethiopian Civil Service University College of Finance, Management and Development

Ethiopian Civil Service University
College of Finance, Management and Development
Welcome to
Advanced Public finance &

Taxation
Messele Getachew (PhD)
abaymesy12@gmail.com
Thursday, November 11, 2021 1

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.
MODULE DESCRIPTION
This module intends to provide the students with concepts and practices
of public finance and taxation.
It offers students with additional knowledge on matters dealing with

public finance and taxation in both the local and the international sectors.
The module describes public financial systems that comprise taxation,

public expenditure, deficit financing and public financial regulations.

Learning Outcomes
After completion of the module students will be able to:
 Understand the thoery and practice of public finance with especial reference
to Ethiopia
 Understand various tax laws applicable in general and with special reference
to Ethiopia as well as to other countries.
 identify the characteristics of taxes and taxation in general;
 understand the objectives and principles of a tax policy proposal and
conflicts among some of them;
 explain the problems in the application of the principles of a tax policy
proposal like equity principle;
 comprehend the types of taxes and tax system and practical problems in
deciding on tax bases (income, value added and other tax bases);

Learning Outcomes
After completion of the module students will be able to:

 explain the various issues in international taxation regime
including issues of taxation of foreign source incomes,
international double taxation and international tax avoidance
through subsidiaries and transfer prices;
 comprehend on the role of taxation in financial decision
makings such as investment, dividend and finance decisions;
 Distinguish between tax avoidance and evasion; and
 Examine the Ethiopian tax system in the context of the
theoretical underpinnings of taxation.

MODULE CONTENTS
1. Public Finance – General Introduction

2. Fiscal Federalism and Power of Taxation
3. General Overview of Taxation
4. Ethiopian Tax Structure
5. International Trade Taxes
6. Economic Impact of Taxation
7. Fiscal Administration and Tax Administration Reform.

ASSESSMENT
As part of assessment on the course students will
submit
Test (20%), (Ch 1 and 2)
Oct 25,2021
Article review report (20%)
Submission Deadline: Oct 30,2021
Group Assignment 20%(Ch 4)
Submission Deadline: Nov 3,2021
Final examination (40%)
CHAPTER ONE
PUBLIC FINANCE – GENERAL
INTRODUCTION
7
Learning Objectives
• Identify the problems and issues addressed in
the discipline of public finance
• Discuss ways to think about the role of the
public sector in an economy
8
The Field of Public Finance
 Public finance is field of study in economics that is concerned with the

financial activities of the public sector—that part of the economy
controlled by governments
 Richard Musgrave definition: The complex of problems that center
around the revenue-expenditure process of government is referred to
traditionally as public finance
9
What is Public Finance?
• Very few areas of our lives are untouched by
the public sector.
• All policies of the public sector confer benefits
upon and exact costs from members of the
society
What is Public Finance?
• Public finance is the study of how spending and tax policies influence our
economic lives.
In examining how governments influence our lives, public finance addresses

one fundamental issue: why do we want the public sector to exert such
powerful influences over our lives & public finance, a sub discipline of
economics ( also known as public sector economics or just public
economics), provides us with a framework for understanding changing and
improving the ways in which the public sector influences our lives
The Field of Public Finance
• We want to know:
– Which activities it is sensible for governments to
perform
– The right quantities of public goods and services that
should be provided
– And the best method of paying for those services
12
Adam Smith’s Roles of Government (1776)
• The first duty of the sovereign [is] that of protecting the society from
the violence and invasion of other independent societies
• The second duty of the sovereign [is] that of protecting, as far as
possible, every member of the society from the injustice or
oppression of every other member of it, or the duty of establishing
an exact administration of justice
19
Musgrave’s Economic Roles of Government
• Allocation
• Distribution
• Stabilization
21
Allocation Role of Government
• Allocate resources in public sector
• Involves making decisions on public expenditure programs
to provide the public goods and services citizens desire at
tax/fee rates they are willing to pay
22
Distribution Role of Government
• Given output of economy (measured in GDP or other terms),

the question is who receives the benefit of that production?
• If the distribution provided by the market mechanism is
unacceptable, there is a role for government to redistribute
income or wealth
23
Stabilization Role of Government
• Stabilize output, employment, and prices
24
Scope of Public Finance:
• The Subject matter of the public finance is classifies under
five broad categories. They are:
1. Public revenue
2. Public Expenditure
3. Public debt
4. Financial administration
5. Economic stabilization
26
Public Revenue Source
• Public revenue is the means for public
expenditure. Various sources of public revenue
are:
a. Tax revenue
b. Non-tax revenue
27
Public Revenue Source…
A)Tax revenue: - Taxes are compulsory payments to government
without expectation of direct return or benefit to tax payers.
It imposes a personal obligation on the taxpayer.
Taxes received from the taxpayers, may not be incurred for their
benefit alone.
Taxation is the powerful instrument in the hands of the government
for transferring purchasing power from individuals to government.
The objectives of taxation are to reduce inequalities of income and
wealth; to provide incentives for capital formation in the private
sector, and to restrain consumption so as to keep in check domestic
inflationary pressures.
28
Public Revenue Source…
B)Non-tax revenue:- This includes the revenue
from government or public undertakings,
revenue from social services like education and
hospitals, and revenue from loans or debt service.
To sum up, non-tax revenue consists of:

Interest receipts
Dividends and profits
Fiscal services and others.
29
Public Expenditure theories
• Government of a country has to use its expenditure
and revenue programs to produce desirable effects on
national income, production, and employment.
• The role of public expenditure in the determination
and distribution of national income was emphasized
by Keynes.
• Public expenditure plays the dual role of
administration and economic achievement of a nation.
30
Public Expenditure theories…
• Hence planned expenditure and accurate foresight of
earnings are the important aspects of sound government
finance.
• Public expenditure is done under two broad heads viz.,
developmental expenditure and non-developmental
expenditure.
• developmental expenditure includes social and community
services, economic services, and grants in aid.
• non-developmental expenditure mainly consists of interest
payments, administrative services, and defense expenses.
• Expenditure can also be classified into revenue and capital
expenditure. 31
Public Debt/ Deficit Financing
• This category deals with the causes, methods and
problems of public borrowings and its management.
• This includes both internal debt and external debt.
• Debt raised for productive purpose will not be a burden
on the economy.
• There are many objectives of creation of public debt.
Debt may be raised to meet the normal current
expenditure, exigencies(Emergencies) like war, finance
productive government enterprise, finance public social
welfare and economic development.
32
Public Financial Management
• Public financial management entails the development of
laws, organizations and systems to enable sustainable,
efficient, effective and transparent management of public
finance.
• Public financial management (PFM) is an essential part of the
development process.
• Sound PFM supports aggregate control, prioritization,
accountability and efficiency in the management of public
resources and delivery of services, which are critical to the
achievement of public policy objectives, including
achievement of the Millennium Development Goals (MDGs). 35
Public Financial Management
• Strong public financial management (PFM) systems are
essential for effective and sustainable economic management
and public service delivery.
• States are effective and accountable when they are underpinned
by good PFM institutions and systems.
• Good PFM systems are also indispensable in ensuring that aid
is being used to achieve development goals.
37
PFM: Why does it matter and how best to
improve it?
PFM Training PPT 38

End of chapter 1
41

Advanced Public Finance & Taxation: Ethiopian Civil Service University College of Finance, Management and Development

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Advanced Public Finance & Taxation: Ethiopian Civil Service University College of Finance, Management and Development

Uploaded by

Copyright:

Available Formats

Ethiopian Civil Service University

College of Finance, Management and Development

Advanced Public finance &

Thursday, November 11, 2021 1

It offers students with additional knowledge on matters dealing with

The module describes public financial systems that comprise taxation,

Thursday, November 11, 2021 2

Thursday, November 11, 2021 3

After completion of the module students will be able to:

Thursday, November 11, 2021 4

1. Public Finance – General Introduction

7. Fiscal Administration and Tax Administration Reform.

Thursday, November 11, 2021 5

 Public finance is field of study in economics that is concerned with the

In examining how governments influence our lives, public finance addresses

• Allocate resources in public sector

• Involves making decisions on public expenditure programs

to provide the public goods and services citizens desire at

tax/fee rates they are willing to pay

• Given output of economy (measured in GDP or other terms),

To sum up, non-tax revenue consists of:

PFM Training PPT 38

You might also like