Public Finance-- Public Finance refers income and expenditure of public bodies and the

government Findlay Shirras- Public finance is the study of the principles, understanding the
spending and raising of funds of the public authorities nation.

Two Type of Functions—1.Obligatory—Defense ,Maintains of laws 2.Optional Functions –

Providing various facilities of its citizens like as health,Environment,etc

Government Rises fund-Taxes,fess,penalties,sale of goods and services.

Public Revenue: Public Revenue Refers to the income of a government from various
sources.Exam-what are the sources,how much the amount.

Sources of Public Revenue: 1.Tax Revenue –First and foremost source 2.Non Tax Revenue-is
the revenue obtained by the government from sources Other than tax .Example—a)fees. b)
Fine and penalties--form of punishment ,c)surplus from public enterprise-profit from selling
and services.d)special assessment of better levy –government park,road,bridge toll.

Tax Means income tax payable under the ordiance and includes any additional tax,excess profit
tax,penalty,interest fess or other charges payable under this ordiance.

TAX--‘’Taxe’’ it is French word .The Latin word Taxare means to charge.

Definition Tylor –Taxes are compulsory payment to government without expection of direct
return in benefit to the tax payer.

Characteristics of Tax -1.tax is not a fine or penalty 2.Tax can only be imposed by the
government of a country .3 The aim of the tax collecton is to finance the government
expenditure to ensure public interest.

Classification on the basis of number of Taxes –Single tax –incorporate only one tax multiple
tax-comprises different types of tax.

Classification on the basis of impact and incidents- Direct Tax—paid by those persons on whom
they are imposed. EXM-income tax .land revenue. Indirect Tax –are imposed on sales and
purchase of any goods and services. Example-Vat,Custom Duty.

Classification on the basis structure of Tax : Proportional tax what ever the income size tax
rate 10000—10% 500000-10% MERIT- easy and simple to calculate Demarit It is not based on
principle of equity. -progressive-Tax rate increases as the income increases-10000-10% 50000-
15% Marit flexible tax system,promote equality .Demarit-it is discourage . Regressive tax –
Burden Falls more heavily on poor. 10000-15%, 500000-10% Marit-Encourage savings and
investment Demarit-it does not follow the ability to pay principle.
Classification on the basis subject matter of Taxation : Personal tax paying capability -income
tax IN REM TAX basis activities and object -sales tax,wealth tex

Classification on the basis Elasticity of Tax:

The importan

ce of public finance

Purposes and objectives of Taxation-

Revenue collection— Tax is a major source of revenue. 80% government revenue comes from
the tax