C1 Pub Fin

Primitive societies lived by _________. No formal taxation and budgeting existed.

Subsistence Economy

A ________________ is an economic system where people produce goods and services primarily for their own use and survival, rather than for trade or profit in the market.

subsistence economy

How did medieval feudalism contribute to the development of modern public finance systems?

It introduced early forms of accounting, auditing, and structured tax collection, helping rulers systematically track resources and collect tributes — a foundation for modern taxation and budgeting.

What were taxes used for in Ancient Mesopotamia and Egypt?

To maintain irrigation systems, temples, and armies.

What were the two main treasuries in Ancient Rome’s fiscal system?

The Aerarium (senate-controlled treasury) and the Fiscus (imperial treasury).

How did Medieval Feudalism contribute to the evolution of public finance?

It introduced accounting and auditing practices, and organized tax collection through feudal dues, land rents, and tithes.

combined land & head tax

Capitatio-Iugatio tax reform

From primitive, ancient, and medieval the system became more __________.

Organized

Societies shifted from survival to

Structured state of finance

Emergence of Mercantilism

The period when national economies and centralized political power were forming. Countries started debating about how to raise money and manage taxed effectively.

Jean Bodin (1576) gave 3 guiding principles how to raise money and manage taxes effectively 

1. Raise revenues wisely

2. Spend prudently

3. Reserve funds for the future

Developed the exchange theory of public finance

Thomas Hobbes

What is exchange theory of public finance?

It states that taxes are paid by citizens in exchange for public services provided by the government, similar to a transaction between consumer and provider. 

• _________ contributed pioneering methods of national income estimation and land valuation, which influenced public revenue systems.

• Sir William Petty

• ________, a leading proponent of the balance of trade doctrine, linked fiscal health directly to trade surplus.

• Thomas Mun

• ____________ examined the incidence and fairness of taxes, particularly on land, while

• John Locke

• ___________ analyzed the complexities of war finance and its impact on national stability.

• Charles Davenant

• ____________, a representative figure of this group, is known for his "economic table" (tableau economique).

• Francois Quesnay

• _________ believed that only farms and farmers could produce a net product, which was included in the rent paid to or received by the exclusive class.

• Quesnay

Quesnay believed that ________________________________ — while other sectors like manufacturing merely transform goods without creating new value.

only agriculture produces a "net product" (surplus or real profit)

showed how money flows from one class to another, proving that national prosperity depends on agricultural productivity.

Economic table “tableau economique”

is the belief that the wealth of a nation comes solely from agriculture and natural resources, and that the economy should be governed by natural laws rather than heavy government intervention.

Physiocracy

Physiocracy is an early economic theory that says____________________________.

agriculture is the foundation of all wealth, and economies should follow natural laws with minimal government control.

Book of Keynes

The General Theory of Employment, Interest, and Money (1936).

Main concept of Keynesian economics

Demand drives the economy; low demand leads to low growth.

Government should use fiscal policy in Keynesian:

1. Increase public spending (infrastructure, services).

2. Lower taxes to encourage consumption.

Example of Keynesian Policy in the Philippines

The “Build, Build, Build” Infrastructure Program (2016–2022)

• To stimulate economic growth, the Philippine government massively increased public spending on roads, airports, railways, and bridges.

CYCLES OF PUBLIC FINANCE PROCESS

1. Formulation of Fiscal Policy

2. Generation of revenue and other sources

3. Expenditure of funds through the national budget

4. Public Borrowings

5. Accountability

First Filipino economist, criticized colonial taxation abuses.

Gregorio Sancianco

One of the earliest economic writings advocating better fiscal reforms.

El Progreso de Filipinas

Established to centralize tax collection and spending.

Department of Finance (DOF)

The Philippines experienced budget deficits, showing the need for better fiscal planning.

1919-1922 Financial Crisis

• First comprehensive textbook on Philippine fiscal policy and administration

Philippine Public Finance by Romualdez, Yoingco, and Casem (1973)

Philippine Public Finance by Romualdez, Yoingco, and Casem (1973)

Covered taxation, government budgeting, debt management, and fiscal control

ADDITIONAL INSTITUTIONAL EVOLUTION (Post-1980s)

1. VAT INTRODUCTION (1988)

2. DECENTRALIZATION (1991 LOCAL GOVERNMENT CODE)

3. BUDGETARY REFORMS (Post-1990s)

4. INTERAGENCY FISCAL BODIES (Post-1980s)

DECENTRALIZATION (1991 LOCAL GOVERNMENT CODE)

• Devolved many frontline services to LGUs (provinces, cities, municipalities, barangays):
  health (local hospitals, RHUs), agriculture extension, social welfare, local infrastructure, environmental services.

• Granted local fiscal powers: levy real property tax, business tax, fees/charges, and borrow or do PPPs.

• Guaranteed a formula-based national transfer (formerly IRA, now NTA).

BUDGETARY REFORMS (Post-1990s)

What changed (key building blocks)

• Medium-Term Expenditure Framework (MTEF): Links the annual budget to 3–5-year plans (e.g., the PDP), so spending aligns with strategy instead of year-to-year improvisation.

• Performance-Informed Budgeting (PIB): Agencies present outputs/outcomes with targets and indicators in the GAA.

a) Investment Coordination Committee (ICC) – under the NEDA Board

Role

• Screens and appraises major capital projects (usually large infrastructure and those using ODA or PPPs).

• Reviews cost-benefit, economic/financial returns (e.g., EIRR), risk allocation, and alignment with national plans.

• Recommends to the NEDA Board for approval.

b) Government Corporate Monitoring & Coordinating Committee (GCMCC)

Role

• Historically monitored government-owned and -controlled corporations (GOCCs)—their budgets, subsidies, and performance; coordinated policy actions across departments.

INTERAGENCY FISCAL BODIES (Post-1980s)

Investment Coordination Committee (ICC)
Government Corporate Monitoring & Coordinating Committee (GCMCC)