Public Finance notes for I-comandM-A Economics. 1. Sources of public finance.2. Difference between Public and Private finance.3. Canons of Taxation.4. Direct and Indirect tax.5. Difference between Direct and Indirect tax.6. Difference between Zakat and Tax.7. Short note on Zakat.8. Budget.9. Fiscal Policy.
6. Difference between Zakat and Tax.
Difference between Zakat and Tax.
|
1. Zakat is liable
for the accumulated wealth of Sahib-i-Nisab Muslims. |
Tax is imposed on the income and wealth of the citizen of nations. |
|
The payment of
Zakat is a religious duty. |
It is the duty of every citizen to pay taxes. |
|
The Zakat rate has
been fixed at 2% % forever. |
The Zakat rate has
been Up and down. |
|
The objective of
the Zakat is to meet the needs of the needy. |
The objective is to
meet the development or non-development expenditure of the government. |
|
Zak at is a
religious obligation. |
Paying taxes is a national responsibility. |
|
Zakat is paid only
once a year. |
paid every day again and again in the form of excise duty and sales
tax. |
|
The rate of Zakat
is proportional for all Sahib-i-Nisab Muslims. |
A tax is paid
almost by all the rich and the poor of a country. |
7. Short note on Zakat.
ZAKAT
Zakat is one of the Basic Pillars of Deen-i-Islam. It is primarily meant for meeting the economic needs of needy Muslims.
However, alleviating poverty and equitable distribution of wealth are two main objectives of the institution of Zakat Meaning of Zakat
Literally, the word Zakat has two meanings:
i) that which purifies,
ii) that which causes growth In a religious sense, it is the non-tax fiscal obligation that each and every Sahib. Nisab Muslims have to pay the poor and needy Muslims.
Assessment of Zakat
For the assessment of Zakat, the following two aspects must be considered.
1) It is liable to pay by every Sahib-i-Nisab Muslim:
According to Shariah, a Muslim is able to pay Zakat only if he has in his possession for one full year of a minimum of the following;
7% tolas of gold or 52, tolas of silver or cash money or jewelry or other liquid assets to the equivalent value.
ii) It should also be paid from exposed wealth: Zakat must also be paid from the wealth which is exposed to the society, e.g. agricultural produce, animal, minerals and business inventories, etc.
Zakat, however, is not due to the necessities of life such as a dwelling house, articles of clothing and household furniture, and capital goods.
The Rate of Zakat is to be paid from the exposed wealth at a prescribed rate of 22% per annum.
Zakat in form of usher is to be paid at a rate of 10% from the agricultural produce of the land which is irrigated by natural resources i.e. rains. However, it is 5% of such agricultural produce, is produced by artificial means of irrigation, i.e., canals and tube wells, etc.
Zakat is also payable on such animals which are kept for commercial purposes. The rat of Zakat on these animals has been prescribed as follows.
• One goat from 40-120 goats, two goats from 121-200 goats, and 3 goats from 20-300 goats. One cow from every 40 cows. One camel from every 50 camels.
The rate of Zakat has been fixed at 20% on mineral commercial resources like coal, petroleum, gas, iron, salt, etc., only if they are privately owned.
8. Budget.
BUDGET
What is a budget?
budget is an annual statement of income and expenditure of a government. According to Taylor,
The higher is the master financial plan of a government. Il brings together estimates of anticipated revenues and proposed expenditures for the budget period and from these estimates, the activities to be undertaken and the means of their financing can be inferred
In fact, a budget is an important instrument of financial administration, through which the financial affairs of the state are regulated. It is an annual statement of the expenditure and Revenue of a government. It is prepared by the financial authority. It usually covers the current year, the preceding as well as the year following. It consists of proposals for the collection of revenue and the allocation of revenue resources among the various heads of expenditure.
Types of Budget
There are three types of budget.
1. Balanced Budget.
2. Surplus Budget.
3. Deficit Budget.
Balanced Budget:
If the budget balance is zero; total estimated revenue and total proposed expenditure are equal, and the government has a balanced budget.
According to Dr. Dalton, "the common conception of a balanced budget is that, over a period of time, revenue does not exceed or at least fall short of expenditure.
Surplus Budget:
If the total estimated revenue of the budget is greater than the total proposed expenditure the government has a surplus budget.
Deficit Budget :
If the total estimated revenue is lesser than the total proposed expenditure the government has a deficit budget.
A budget, may it be a balanced or a surplus, or a deficit, consists of the following two parts :
Revenue Budget
a)Revenue Budget.
b)Capital Budget.
This part of the budget consists of tax revenues, non-tax revenues a revenue and the expenditure to be met from these revenue receipts. Tax revenue is the proceeds of taxes levied by the government. It includes income tax, corporate tax, wealth tax, custom duties, excise duties, surcharges, sales tax, other taxes, etc.
Non-tax revenue includes income from property tax and enterprises, and receipts from civil administrators, In this part of the budget those non-development expenditures are also shown which the government meets from its current revenues. They include defense, law and order, education, health, debt servicing, subsidies, etc. These expenditures are considered the non-development expenditures of the government because they do not contribute any addition to the existing stock of the country.
Capital Budget :
This part of the budget shows capital receipts and development payments of the government. The main form of capital receipts are loans raised from the public, borrowing from the central bank through the sale of treasury bonds and bills, and loans received from foreign countries. Capital expenditure consists of those expenditures suggested spending on roads, railways, ports, water, gas, electricity, irrigation projects, long-term projects, etc. Since these expenditures help in raising the rate of economic growth of the economy, therefore they are called development expenditures.
9. Fiscal Policy.
Fiscal policy
The government's revenue-raising and revenue spending activities are called fiscal policy.
"Fiscal Policy is implemented by the government through its deputed authorities. The fiscal policy is known as Budgetary Policy. A government through its fiscal policy can affect output. income and price level in the economy."
The main role of the fiscal policy in an under-developing country, like Pakistan, is to accelerate the rate of capital formation.
The fascial policy may be of the following two kinds.
a.Discretionary fiscal policy,
b. Non-discretionary fiscal policy,
a.Discretionary Fiscal Policy
Discretionary Fiscal Policy is implemented for the purpose of deliberate change in the government expenditure and taxes to influence the level of national output and prices. Contrarily,
b.Non-discretionary fiscal policy
Non-discretionary fiscal policy is an automatic mechanism.
To care recession, govt prefers to enforce the discretionary policy by increasing its expenditure or cuts down taxes, or using a combination of the both. At another hand, to control inflation, govt, prefers to cut down its expenditure or raise taxes. In other words, to cure the recession, expansionary fiscal policy, whereas to control inflation, the contractionary fiscal policy provides good results,
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M.A economics f Saleem.
