Topic # 2: Government Revenues PROF. ANDREEA STOIAN, PHD LECTURE 4

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1 Topic # 2: Government Revenues PROF. ANDREEA STOIAN, PHD LECTURE 4

2 Content Government Revenues Content Size Changes Composition Factors influencing the size, dynamics and the composition of government

3 Learning outcomes Students will be able to: Define the concept of government Know about the size of government Know about the dynamics of government Know the composition of government Give examples of government Identify the types of government

4 Government Revenues vs. Financial Resources Taxes and other compulsory transfers imposed by government units Government debt (borrowings) Voluntary transfers received from other units Government : an increase in the government s net worth resulting from a transaction Property income derived from the ownership of assets Money (Central Bank) Sales of goods and services EU Funds

5 Current taxes on income and wealth. Direct taxes Taxes on income, profits and capital gains i) wages, salaries, tips, fees, commissions, fringe benefits, and other compensation for labor services; (ii) interest, dividends, rent, and royalty incomes; (iii) capital gains and losses, including capital gain distributions of investment funds; (iv) profits of corporations, partnerships, sole proprietorships, estates, and trusts; (v) taxable portions of social security, pension, annuity, life insurance, and other retirement account distributions Taxes on property recurrent taxes on immovable property: taxes levied regularly on the use or ownership of immovable property, which includes land, buildings, and other structures. recurrent taxes on net wealth: taxes levied regularly on net wealth, which is usually defined as the value of a wide range of movable and immovable property less liabilities incurred on that property. estate, inheritance, and gift taxes: taxes on transfers of property at death and on gifts. taxes on financial and capital transactions: taxes on change of ownership of property, except those classified as gifts, inheritance, or estate transactions. Included are taxes on the issue, purchase, and sale of securities, taxes on checks and other forms of payment, and taxes levied on specific legal transactions, such as the validation of contracts and the sale of immovable property.

6 Taxes on goods and services. Indirect taxes Value Added Tax (VAT) tax on goods or services collected in stages by enterprises but which is ultimately charged in full to the final purchasers It is described as a deductible tax because producers are not usually required to pay the government the full amount of the tax they invoice to their customers, as they are permitted to deduct the amount of tax they have been invoiced on their own purchases of goods or services intended for intermediate consumption or fixed capital formation is usually calculated on the price of the good or service, including any other tax on the product Excise taxes levied on particular products, or on a limited range of products it may be imposed at any stage of production or distribution and are usually assessed by reference to the value, weight, strength, or quantity of the product Included are special taxes on individual products such as sugar, beetroot, matches, and chocolates; taxes levied at varying rates on a certain range of goods; and taxes levied on tobacco goods, alcoholic drinks, motor fuels, and hydrocarbon oils

7 Taxes on international trade. Indirect taxes Custom and other import duties This item covers revenue from all levies collected on goods because they are entering the country or services because they are delivered by nonresidents to residents. The levies may be imposed for revenue or protection purposes and may be determined on a specific or ad valorem basis, but they must be restricted by law to imported products. Included are duties levied under the customs tariff schedule and its annexes, including surtaxes that are based on the tariff schedule, consular fees, tonnage charges, statistical taxes, fiscal duties, and surtaxes not based on the customs tariff schedule. Taxes on exports This category includes all levies based on the fact that goods are being transported out of the country or services are being delivered to nonresidents by residents.

8 Social security contributions actual or imputed receipts either from employers on behalf of their employees or from employees, selfemployed, or non-employed persons on their own behalf that secure entitlement to social benefits for the contributors, their dependents, or their survivors. social contributions consist of all social security contributions and all contributions to unfunded employer social insurance schemes that provide benefits other than retirement benefits

9 The analysis of the Romanian government Governent in nominal terms (mrd.ron) The absolute value in nominal terms

10 The analysis of the Romanian government The absolute value in real term (2015=100) Government in real terms (mrd.ron) 50 0

11 The analysis of the Romanian government Government in nominal vs. real terms (mrd.ron) Government in nominal vs. real term

12 The analysis of the Romanian government Government to GDP ratio Government (% GDP)

13 The analysis of the Romanian government Government per capita Government per capita (euro/pers.)

14 Government (% GDP) International comparisons Government to GDP ratio in RO, EU, EURO area

15 Government per capita (euro/pers.) International comparisons Government per capita in RO, EU, EURO area

16 The analysis of the Romanian government Elasticity 2.9 The elasticity of the government to GDP

17 The composition of the Romanian government Total government Current Subsidiesi Capital Donations EU grants Tax Social security contributions Non-tax Direct taxes Indirect taxes Tax on profits Taxes on salary and individual income Property taxes VAT Excises Custom duties and taxes on exports

18 The analysis of the Romanian government The composition of the Romanian government Source: Romanian Fiscal Council, 2017 Total govt. Tax Tax on indiv.income Tax on profits Tax on property VAT Excise SSC Non-tax Donations EU granys

19 Factors influencing the size, dynamics and the composition of govt. Economic Demographic Monetary Politics

20 online.ase.ro PROFESSOR S Q