Topic 1 - The Economy - National Budget

AC1 - Business Textbook

What is the National Budget?

A summary of the government's expected income and planned expenditure.

What are the two types of government revenue?

Direct tax, Indirect tax

What is expenditure?

The amount of money that is spent by the government.

What does a surplus indicate?

Income exceeds expenditure.

What does a deficit indicate?

Expenditure exceeds income.

What is fiscal policy?

The method by which the government manages its income and expenditure.

What is a fiscal year?

A period used for calculating annual financial statements.

What is the main source of government income?

Taxes paid by citizens and businesses.

What are direct taxes?

Taxes paid directly to the government by the taxpayer.

What is personal income tax?

Tax paid by individuals on their earned income.

What is company tax?

Tax paid by businesses on their profits.

What are indirect taxes?

Taxes paid on the sale of goods and services, collected by retailers.

What is VAT?

Value Added Tax, an example of an indirect tax.

What is an example of direct tax?

Income Tax, Company Tax

What is an example of indirect tax?

VAT, Fuel levy, Excise duties

What is Value Added Tax (VAT)?

Tax charged on most goods and services bought.

What is the current VAT rate?

15%

Which goods are excluded from VAT?

Brown bread, Eggs, Vegetable oil, Grains, Rice, Milk, Fresh fruit and vegetables, Dried legumes, Canned fish

What are excise duties?

Taxes on tobacco and alcohol products to discourage use.

What are customs duties?

Taxes on the import of goods to and from other countries.

What is a fuel levy?

Tax imposed on the sale of petrol and diesel.

What does municipal tax cover?

Paid for refuse removal, sewage, water, etc.

What is transport tax?

Paid on train and air tickets, toll roads, etc.

What does the government use revenue for?

To provide public goods and services.

What is the government's focus in education spending?

Providing schools, educators, textbooks, and furniture.

What does the health department provide?

Primary health care in local clinics.

What are the goals of the health department?

Increase life expectancy

Lower mother and child death

Combat HIV and AIDS

Strengthen health system

How does the government support housing?

Provides housing and social grants to poor citizens.

What are social grants?

Support for the poorest households against poverty.

What types of social grants are provided?

Old age pensions, Disability, Child support, Foster care

What is the role of the Department of Transport?

Regulates public transport and provides infrastructure.

What is the government's responsibility for security?

Keep peace and enforce law and order.

What is the impact of the National Budget?

Instrument of fiscal policy impacting economic growth.

What is the national budget used for?

To shape or stimulate economic growth.

How does the national budget stimulate economic growth?

By encouraging new businesses and expanding existing ones.

What is economic growth?

An increase in the capacity to produce goods and services over time.

How can economic growth be measured?

In nominal terms (including inflation) or real terms (adjusted for inflation).

What is inflation?

A rise in the general level of prices due to increased money volume, leading to currency devaluation.

What are the effects of economic growth?

Increase in employment, Fall in unemployment, Increase in tax revenue, Increased spending on public services, Increased consumption

What does the National Budget aim to address?

Economic and social inequalities caused by past policies.

What are examples of initiatives in the National Budget?

Social grants for a third of the population, Free health services, No fee schools for 60% of learners, Housing, water, and electricity for poor communities

What is the biggest income source for the State?

Taxes.

What is income tax?

Tax on earnings, deducted from wages by the employer and paid to the government.

What is the financial year of the government?

From 01 April of one year to 31 March of the following year.

Who reads the national budget?

The Minister of Finance.

What is an example of a sin tax?

Wine tax.

What is the purpose of social grants?

To assist the poor and redress economic inequalities.

What is PAYE?

Pay As You Earn: Tax deducted from wages by employers and paid to the government.

What is the standard rate of VAT?

15%: Taxes levied on goods and services.

What is the main source of government income?

Income Tax: Paid on earnings from taxable income.

What are some exempt goods and services from VAT?

Certain goods and services are exempt from VAT.

How does the national budget influence economic growth?

By spending on: Public transport, Job creation, Education, Infrastructure improvements

What is a direct tax?

A tax where the taxpayer is responsible for the payment, e.g., Income Tax.

What is an indirect tax?

A tax where the burden is passed to consumers, e.g., VAT.

What is the effect of increased employment on economic growth?

Leads to increased tax revenue and consumption.

What does infrastructure spending include?

Roads, Ports, Railways, Energy, Education, Healthcare