Government Budget and the Economy Class 12 Notes CBSE Macro Economics Chapter 5

 Budget:-

 A budget is the annual  financial statement that contains an estimate of future revenue and expenditure of the government . It is a details financial statement of  a country's revenue and expenditures.

Objectives of Budget:-

                  The Main Objectives of the Budget are:

1. Resource Reallocation.

2.  Redistribution of Income and Wealth 

3.  Management of Public Enterprises.

4. Economic Stability

5. Economic Development

6. Employment Generation 

Components of Budget:-

                   Two main components of Budget are-

1. Revenue budget

2. Capital budget

1. Revenue budget: 

           The revenue budget consist of the government  revenue receipts and the expenditures that are met with that revenue. Revenue receipts and revenue expenditures of the government are shown in the revenue account.

2. Capital budget: 

                   Capital budget includes capital receipts and capital expenditures. The capital receipts are shown in the capital account .

Revenue Account:-

            The revenue account consist of the current receipts and expenditure of the government. Revenue receipts refers to those receipts of the government which neither create a liability nor lead to reduction in assets. Revenue receipts consist of -

Tax Revenue:- 

          Tax revenue consist of the proceeds of taxes and other duties leived by the government, which includes direct taxes like personal income tax and corporation tax and indirect taxes like excise taxes, customs duties , service tax etc.

Non Tax Revenue:-

          Non-tax revenue of the government consist receipts from sources other than tax like interest and dividends on government investment, administrative revenue - eg. license fees, registration fees, fines and penalties etc.

Different types of taxes:-

               The various taxes that are imposed by the government are given below:

a. Direct Tax

b. Indirect Tax

c. Proportional Tax

d. Progressive Tax

e. Regressive Tax

Direct Tax :-

             Direct taxes refers to those types of taxes that cannot be shifted to anyone else, that is, the impact and incidence of the tax is on the same person who pay the tax. Examples of direct tax - expenditures tax, estate tax, wealth tax, gift tax, property tax etc.

Indirect Tax :-

                 Indirect taxes is defined as those taxes which are ultimately borne by some other person than the person who first paid the tax. In other words, the impact of indirect is on one person while its incidence is on some one else to whom the burden of tax is shifted. Example of indirect tax - sale tax, excise duty, export duty, import duty, entertainment tax etc.