Public Finance

The following sections are included:

• Preface

• Contents

The following sections are included:

• The Economic Justification for Government Activity
  • Conditions for private markets to yield an optimal allocation of goods and services
  • Consequences of market imperfections

• Specific Activities for Governments
  • Addressing natural monopolies
  • Public goods
  • Creating an economic framework that allows private markets to work well
  • Managing public goods and services
  • Externalities
  • Merit goods
  • Addressing distributional issues
  • Stabilization
  • Addressing information failures: Regulation and social insurance

• Summary

The following sections are included:

• Fiscal Policy: An Introduction

• Fiscal Policy and Aggregate Demand
  • Fiscal policy in a closed economy
  • Fiscal policy in an open economy
    • Open economy with limited capital mobility and flexible exchange rate
    • Open economy with perfect capital mobility
    • Impact of budget financing
    • Other factors affecting the impact of fiscal policy
  • Fiscal policy in countries with limited credibility

• Fiscal Policy and the Supply Side

• Fiscal Policy and the Balance of Payments

• The Interaction between Fiscal and Monetary Policy

• Using Fiscal Policy for Macroeconomic Management
  • Relative effectiveness of tax and spending policies for adjustment
  • Using fiscal policy to promote economic growth

• Limitations on Fiscal Policy

• Summary

The following sections are included:

• Business Cycles and the Government Budget

• How the Stage of Economic Development and Other Factors Affect Fiscal Policy

• Is Fiscal Policy Pro- or Counter-Cyclical?
  • Industrial countries
  • Developing and emerging market countries

• Making Policy More Counter-Cyclical

• Summary

The following sections are included:

• Coverage of the Fiscal Sector

• Fiscal Accounts
  • Main elements of the fiscal accounts

• Fiscal Analysis: Key Indicators
  • Traditional measures of budget balance
    • Conventional (cash or overall) balance
    • Primary balance
    • Operational balance
    • Government savings
    • Public sector borrowing requirement
  • Fiscal balances under the 2001 GFS
  • A quick introduction to fiscal sustainability
  • Budget financing
    • Foreign financing
    • Domestic financing
    • Drawing on foreign exchange reserves
    • Arrears
  • Revenue analysis
    • The structure of the tax system
    • Measures of revenue performance
  • Expenditure analysis

• Fiscal Forecasting
  • Forecasting revenues
    • The effective tax rate approach
    • The tax elasticity/buoyancy approach
  • Forecasting expenditures
    • Forecasting discretionary expenditures
    • Forecasting interest payments
    • Forecasting budget financing

• Summary

The following sections are included:

• Assessing Sustainability: Basic Considerations
  • Extensions of the basic formulas
    • Impact of non-debt-creating inflows
    • Taking account of uncertainty in forecasts
  • Other factors to consider when assessing sustainability

• Analysis of Fiscal Solvency

• Sustainability: Going Beyond the Basics
  • “Stress testing” public debt
  • Fiscal vulnerability
    • Incorrect specification of the initial fiscal position
    • Short-term fiscal risks
    • Threats to long-term fiscal sustainability
    • Weaknesses in the structure of revenue or expenditure, or in institutional capacity
      • Weaknesses in revenue structure
      • Weaknesses in the structure of expenditure
      • Weaknesses in institutional capacity
  • Interactions with the financial sector

• Fiscal Sustainability and the Financial Crisis of 2007–09

• Summary

The following sections are included:

• Selected Data on Government Revenue

• Purposes of Taxation

• Principles for an Effective Revenue System
  • Revenue adequacy
  • Economic efficiency
  • Fairness
  • Simplicity
  • Conflicts among objectives
  • Special issues regarding exemptions
  • Balancing the objectives

• Major Revenue Sources
  • Personal income tax
  • The corporate income or profit tax
  • Payroll taxes
  • Property taxes
  • Taxes on general consumption
    • Retail sales tax
    • Value added tax
  • Excise taxes
  • Taxes on international trade
  • Minimum taxes and presumptive levies
  • User fees

• Other Tax Policy Issues
  • Tax expenditures
  • Taxing financial transactions
  • Tax treaties and harmonization
  • Implications of globalization for tax policy
  • Tax policy and fiscal federalism

• Tax Administration
  • Basic considerations
  • Administrative tools
  • Trends in tax administration
  • Dealing with tax evasion

• Summary

The following sections are included:

• Rationales for Government Expenditure: A Brief Review

• Expenditure Levels and Composition — An International Comparison

• Main Categories of Government Expenditure

• Issues Affecting Specific Categories of Expenditure
  • Wages and salaries
  • Purchases of other goods and services
  • Subsidies and transfers
    • Consumer versus producer subsidies
    • General issues in subsidy design
  • Interest expenditure
  • Capital expenditure

• Special Expenditure Issues
  • Unproductive expenditure
  • Quasi-fiscal expenditures
  • Mandatory vs. discretionary expenditures
  • Contingent expenditures
  • Public-private partnerships

• Tools for Controlling Expenditure
  • General management tools
  • “Rules of thumb” that can help control expenditure; fiscal space
  • Short-term measures to improve expenditure control
  • More fundamental expenditure reforms

• Summary

The following sections are included:

• Justifications for State Enterprises
  • Natural monopoly
  • Externalities require public management
  • High risk or capital scarcity precludes private entry
  • The service is essential but users cannot pay
  • The public sector can manage the operation better

• Economic Implications of State Ownership
  • Incentives for production and management
  • Factors contributing to management problems
  • Consequences for efficiency
  • Consequences for consumers
  • Pricing at state enterprises
  • Financing issues

• Reforming State Enterprises
  • Whether to divest or reform
  • Enterprise restructuring: key issues
    • Changing operating assumptions
    • Organizational changes
    • Reforming management
    • Introducing competition
    • Risks from restructuring

• Privatization
  • Preparing for privatization
  • Methods of privatization
  • Fiscal impact of privatization
  • Impact of privatization on employment, the share of state enterprise activity in GDP, and revenue
  • Effect of privatization on enterprise performance and perceived welfare
  • Public concerns about privatization, and how governments can respond

• Summary

The following sections are included:

• Background: What Triggers Bank Failures and the Need for Restructuring

• Justification for Public Sector Response to Bank Failure and Financial Crisis

• Policy Options to Support Failing Banks
  • Fiscal costs of addressing bank failure
  • Accounting issues in bank recapitalization
  • Illustrative cases of responding to bank crisis in Asia: Indonesia and Malaysia

• Summary

The following sections are included:

• Key issues in fiscal federalism

• Assigning Expenditure Responsibilities to Different Levels of Government — General Principles
  • Application of the “benefit principle”
  • Factors supporting more central control
  • Examples of how expenditure functions are allocated across levels of government

• Assigning Revenue Sources to Different Levels of Government — General Principles
  • Each level of government needs dedicated revenue sources
  • Higher levels of government can best tap more mobile revenue sources

• Intergovernmental Transfers in Federal Systems
  • Different levels of government receive specified shares of certain tax revenue
  • Revenues may be apportioned on the basis of relative population, revenue effort, or other factors
  • Grants

• Achieving Fiscal Control in Federal Systems
  • Strategies to achieve fiscal control in federal systems

• Fiscal Federalism in Practice
  • Brazil
  • United States
  • India

• Summary

The following sections are included:

• Using Fiscal Policy to Promote Growth
  • Revenue policy
  • Expenditure policy

• Using Fiscal Policy to Alleviate Poverty and Unemployment
  • Revenue measures
  • Expenditure measures

• Summary

The following sections are included:

• Justifications for Public Pension Programs
  • Market failures
  • Other considerations

• Types of Public Pension Programs

• Advantages and Risks of Different Types of Public Pension Systems
  • Fully-funded systems
  • PAYG systems
  • Population aging and fully funded systems
  • Risks affecting all pension systems

• National Pension Programs: Illustrative Examples
  • Fully-funded systems: Malaysia and Singapore
  • PAYG Systems: United Kingdom and United States

• Population Aging and the Outlook for Public Pension Programs

• Reforming Public Pension Programs: A General Approach

• Summary

The following sections are included:

• Basic Characteristics of Health Care
  • General characteristics of health care and the market for health care services
  • Special aspects of heath insurance

• The Role of Government in Health Care
  • Asymmetric information
  • Externalities
  • Distributional concerns

• Trends in Health Expenditures

• Singapore: Avoiding the Rise in Health Care Expenditures as a Percentage of GDP

• Strategies for Containing Fiscal Costs for Health Care

• Summary

The following sections are included:

• Kinds of Fiscal Rules and Their Implications
  • Types of rules
  • Implications of different rules

• Effectiveness of Fiscal Rules

• Fiscal Rules as Part of the Framework for Fiscal Policymaking

• Developing Effective Fiscal Rules
  • General considerations
  • Which indicator to target

• Recent Experience with Fiscal Rules

• Summary

The following sections are included:

• Goals of Fiscal Reform Programs

• Potential Revenue Reforms
  • Broadening the tax base, to allow lower rates
  • Adopting new taxes with good potential for raising revenue
  • Adjusting other taxes and non-tax revenues

• Potential Expenditure Reforms
  • Current expenditures
  • Capital expenditures

• Potential Reforms for State Enterprises

• Potential Reforms in Tax Administration and Public Expenditure Management
  • Tax administration
  • Public expenditure management

• Achieving Fiscal Reform
  • Why reforms are implemented
  • Why reforms sometimes fail
  • Research on reform programs

• Case Studies of Fiscal Reform
  • Countries of the former Soviet Union
  • India
  • Pakistan
  • Brazil
  • Canada
  • United States

• Conclusions

The following sections are included:

• Glossary

• Bibliography

• Index

• Copyright Notice