Economic Management Sciences- The National Budget

What does the government have an important role in?

Running this country

Who are the functions of the country run by?

Some of the functions are controlled directly by the government, while others are cascaded down to different provinces or local municipalities.

Name one important function of the government

TO PREPARE A BUDGET

Why is it important for the government to prepare the national budget?

It’s vital for allocating finite resources to national priorities, ensuring fiscal responsibility, and fostering economic growth

What and why do we do whenever we plan outings or holidays

We plan for budgets

We plan to have enough cash before our holiday or outing

If we don’t have enough money, then we need to increase income or cut down on expenses

What is the budget?

A budget is a plan for the future. The national budget plans for what money will come in and what money will go out and is a summary of the country’s receipts and payments for the future.

Why is a budget vital?

It’s vital if you are going to have any control over what you spend and to be able to know where to cut back on expenses.

What is the ideal goal when preparing a budget?

The income equaling or exceeding the expenses to use extra money for investments or for other projects

What is a consequence of expenditure higher than income in a budget?

You will have to borrow money, which is not recommended for the long term.

What does the Minister of Finance have to do in order to prepare the annual government budget?

Together with his department , calculate how much money is coming in to the state coffers through taxes and loans and how much will be spent on services and interest on loans etc.

When is the National Budget delivered?

Towards the middle or end of Feb

What is the fiscal year?

The annual period regarding the financial sector of a country from 1 March towards the 28th of February.

During the budget presentation, what does the Minister of Finance detail?

He details how much money is required in order to run the country, and where is he going to obtain all this money from.

Give 2 ways in which a government budget differs from a household budget.

1. The budget must be approved by Parliament. Once there has been a vote on it, it becomes law. Spending needs to be monitored in line with what was budgeted

2. The government can afford to spend more than it receives because of its relatively high creditworthiness.

   But over the years the government has continued to borrow money to cover its budget deficit.

What is a Budget Deficit?

The gap between income and spending within a budget

List ONE Expense each type of department listed below indicated in their annual budget(Do this in your workbook)

Health

Agriculture

Transport

Arts and Culture

Housing

Finance'

Foreign Affairs

Social Services

Environmental Affairs

Home Affairs

Education

Correctional Services

Sport and Recreation

Security and protection

Health-Hospitals

Agriculture-Mills and warehousing

Transport—Road transport

Arts and Culture—Museums

Housing-RDP houses

Finance-SARS collects their revenue and the treasury makes all payments reasonable for the budget

Foreign Affairs—Visas

Social Services—Old age pensions

Environmental Affairs—Pollution

Home Affairs—ID books

Education—Public Schools

Correctional Services—Prison and Judiciary Services

Sport and Recreation—Sponsership of teams

Security and protection—Police

Why so you think Health is the largest expenditure present in the national budget?

Give 3 Reasons

• The educational field is the single most critical factor in a country’s development.

• Basic education needs to be obtained by others

• Facilities and funding towards further education

List 3 benefits from the expenditure of the Educational Department

• Provision of study material'

• Proper teachers, professors, tutors, and overall educators.

• Global competitiveness

What is the national health scheme?

A government-funded system designed to provide healthcare access to all citizens based on their health needs, not their ability to pay.

What effect will the National Health Scheme have on the expenses present in the Health column within the National Budget?

A large sum of money will be extensively invested in the health column.

Why is more money being spent on Foreign Affairs than home affairs?

SA needs the support of foreign countries to maintain good relationships with as many countries as possible—SA can’t operate as an independent country

What is the state debt?

The total amount of money a central government owes to creditors.

Give 3 suggestions on how central governments can balance out state debt

Increase revenue through higher taxes

Reduce spending

Restructure debt by renegotiating loan terms with creditors

Give the definitions for the following (do this in your workbook).

Transport duties

Import duties

Income TAX

Stamp duties

Fuel Levy

Excise duties

Company Tax

Bank levies

Value-added tax

Transfer duties—Charged on the purchase of fixed property

Import duties—Charged on the price of goods bought from overseas

Income TAX—Paid as a percentage of wages and salaries earned

Stamp duties—Charged as a part of levy on all legal documents

Fuel Levy—Charged as part of the cost of fuel

Excise duties (sin tax)—Charge as percentage on alcohol and tobacco items

Company Tax—Charged as a percentage of net profit on registered businesses

Bank levies—Charged on bank transactions

Value added tax—paid as a percentage of goods and services bought

What are Direct Taxes

Consist of personal taxes; each individual who earns above a pre-determined figure has to pay income

Give 2 forms in which direct taxes are collected.

1. All employees who earn a fixed income pay their income ro the government on a monthly/weekly basis—PAYE.

2. Those people who do not earn a fixed income but depend on commission, interest, rent—Their annual income varies. Provisional tax is calculated at the same rate as PAYE, but as people are not sure of their actual income, they have to assess/estimate the amount of tax, which is then paid twice a year. At the end of the fiscal year, a balancing is done between what has been paid and what should have been paid.

What are indirect taxes

Taxes included in price of goods—the public are often unaware that they pay tax when purchasing items or services.

Give 5 examples of indirect taxes

VAT

Fuel Levies

Customs and import duties

Excise Duties

Transfer duties

What is a recession?

Slowing down of the economy with less money available to be spent.

Why will each of the taxes reduce during economic recessions?

Companies make less profit, so they pay less tax.

VAT—People spend less money items

Excise Duties—People will cut back on expenditure upon these items

Fuel Levies—People will be more conservative in their travels

Customs duty-less money is spent overseas

Explain the negative effect of workers going onto strike on the amount of income collected by the government.

Lower wages will result in less income paid

Production stops—less income for business, thus less income tax paid.

What is the tax net, and how does it benefit the country if it’s increased?

“Tax net” refers to the people who have evaded taxes. and have been caught; thus, people are not paying taxes

The result has been that more people are paying taxes, so the amount levied per person has been reduced over the last few years.