Sources of funds for the national government

1. 1. SOURCES OF FUNDS for theSOURCES OF FUNDS for the National GovernmentNational

Government

2. 2. Sources of Funds:Sources of Funds: 1. Tax Revenues 2. Non-Tax Revenues such as fees to be

collected

3. 3. 2) borrowings from both domestic and foreign sources; and 3) withdrawals from available
cash balances

4. 4. TaXTaX A tax is a compulsory contribution mandated by law and exacted by the government
for a public purpose. The major tax collecting agencies of the national government are the
Bureau of Internal Revenue and the Bureau of Customs.

5. 5. Tax revenues include the following:Tax revenues include the following:  Income taxes -
Individuals Corporations Miscellaneous  Property taxes - Real property Property transfers
Special assessments Special education tax Stock transfers Miscellaneous  Taxes on goods and
services - Excises on imports Excises on domestic articles Business taxes and licenses Franchise
tax Motor vehicle taxes Miscellaneous

6. 6.  Taxes on international trade and transactions - Import duties Export and premium duties
Foreign exchange Miscellaneous  Other taxes - Documentary stamp taxes Charges on forest
products Wharfage fees and charges Immigration tax Mining tax Community tax Miscellaneous -
Local Government Shares on on Internal Revenue Collections Miscellaneous - Local Government
Shares in the Proceeds from the Development and Utilization of the National Wealth
Miscellaneous

7. 7. non-tax revenues are the following:non-tax revenues are the following:  Operating and
service income - Government services Government business operations Interests Commissions
Insurance/fiduciary bond premiums Rents Trading/production Miscellaneous

8. 8. Income from public enterprises/investments - Interest on loans Dividends on stocks Interest

on bonds Interest on treasury notes/bills Interest on promissory notes Interest on receivables,
acceptances and discounted notes Gain on sale of acquired assets/stocks/bonds Royalties
Government share from toll fees and casino earnings Miscellaneous

9. 9.  Miscellaneous income - Sale of goods/merchandise confiscated Sale of scrap construction

materials Gain on foreign exchange Contributions Inventory adjustments Sweepstakes Sale of
waste materials Miscellaneous

10. 10. Sale of Assets - Public domain Fixed assets Gain on sale of fixed assets Scrap of fixed assets
Intangible assets Investments/stocks/bonds Gain on sale of investments/stocks/bonds Grants
and aids - From foreign countries From other levels of governments Domestic
11. 11. What are the desirable features of aWhat are the desirable features of a tax system?tax
system? A tax system should be revenue- productive; simple and easy to administer,
equitable, and progressive.

12. 12. What are the government's current efforts toWhat are the government's current efforts to
improve tax collections?improve tax collections? The national government has continuously
expended an all-out effort to strengthen its revenue-generating capability through legislative
and administrative reforms. Recently, the government came up with a comprehensive
measure to overhaul the tax system to bring in badly needed revenues for the government.
Called the Comprehensive Tax Reform Program (CTRP), the new tax measure has three
principal components, namely, a) income tax reform; b) excise tax reform; and, c) fiscal
incentives reform. The CTRP aims to widen the tax base, simplify the tax structure to minimize
leakages, undeclared revenues, overstated deductions and corruption to make the system more
elastic and easier to administer.

13. 13. BorrowingsBorrowings Borrowings refer to funds obtained from repayable sources, such as
loans secured by the government from financial institutions and other sources, both domestic
and foreign, to finance various government projects and activities. The government borrows to
provide for the requirements of capital projects and to support priority programs and projects.
Relying solely on domestic resources will limit government’s capability to provide the needed
support. Domestic resources is insufficient to finance priority programs and projects.

14. 14. domestic borrowings & foreigndomestic borrowings & foreign borrowingsborrowings
Domestic borrowings are funds obtained from sources within the country. Domestic
borrowings of the national government are usually made through the auction of treasury bills,
notes and bonds to the public. Foreign borrowings, on the other hand, are funds obtained from
sources outside the country, such as Asian Development Bank (ADB), International Bank for
Reconstruction Development (IBRD), Overseas Economic Cooperation Fund (OECF), etc.
Foreign borrowings can be obtained through loans secured from foreign financial institutions
or through the flotation of government securities in the international market.

15. 15. Why does the government borrow?Why does the government borrow? The government
borrows from any of the following reasons: to finance national government deficits; to obtain
foreign exchange; to secure financing at more favorable terms than the opportunity cost of
revenues; to take advantage of benefits attached to the funds, e.g. technology; and, to
balance the timing of resources with the project gestation and repayment of benefit

16. 16. What are constructive cashWhat are constructive cash receipts?receipts? Constructive cash
receipts are foreign loan proceeds in the form of goods and services for which no cash is
remitted to the national treasury. Such goods or services have been paid directly by the lender
to the supplier.

17. 17. DIMENSIONS OF THEDIMENSIONS OF THE BUDGETBUDGET

18. 18. The budget possesses various dimensions. It can be classified according to the following: By
Sector, By Cost Structure, By Expense Class and By Object, By Region, By Type of Appropriation.

19. 19. A. By SectorA. By Sector The budget contains various type of expenditures. They are for: 1.
Social Services Expenditure; 2. Economic Services Expenditure; 3. Defense Expenditure; 4.
General Public Services; and 5. Debt Burden

20. 20. B. By Cost StructureB. By Cost Structure 1. For General Administration & Support Services or
Overhead Expenses 2. As Support to Operations for the facilitative functions and services, staff
and technical support 3. For Operations of regular activities addressing agency mandate
Example: Production of goods, delivery of pubic services, and regulation, etc. 4. For Projects
such as homogenous group of activities that result in the accomplishment of identifiable output
within a designated period, whether foreign or locally funded

21. 21. C. By Expense Class & By ObjectC. By Expense Class & By Object 1. Current Operating
Expenditures for personal services, maintenance and other operative expenses (MOOE) 2.
Capital Outlays for investments, loans, livestock and crops, land/land improvements,
buildings/structures, furniture/fixtures

22. 22. D. By Major Recipient ofD. By Major Recipient of GovernmentGovernment The major
recipients of the budget are:

23. 23. 1. The NGAs (National Government Agencies) – they include all agencies with the Executive,
Legislative and Judicial Branches of government 2. The LGUs (Local Government Units) – funding
is released in the form of IRAs (Internal Revenue Allotments), special shares in national
proceeds, credit thru the MDF (municipal development fund), and premium subsidies for local
insurance

24. 24. 3. The GOCCs (Government Owned and Controlled Corporations) – funding is through
subsidies, equity and net lending

25. 25. E. By Regional AllocationE. By Regional Allocation The Budget is apportioned for each of
the various regions of the country.

26. 26. F. By Type of AppropriationF. By Type of Appropriation The budget is further classified into
different types, namely: 1. General Appropriations 2. Supplemental Appropriations

27. 27. 3. Continuing Appropriations ◦ refer to appropriations available to support obligations for a
specified purpose or project, such as multi-year construction projects which require the
incurrence of obligations even beyond the budget year. Examples of continuing appropriations
are those from existing laws such as : RA 8150, otherwise known as the Public Works Act of
1995; and Republic Act No. 6657 and Republic Act 8532 which set funds specifically for the
Agrarian Reform Program (ARP). Currently, appropriations for capital outlays and maintenance
and other operating expenses are considered as continuing appropriations but only for a period
of 2 years. 4. Automatic Appropriations ◦ debt service-interest payments, the Internal Revenue
 Allotment or IRA which is the share of local government units (LGUs) from national government
revenue and the Retirement and Life Insurance Premiums (RLIP) which is the share of the
national government in the premium payments to GSIS for the life insurance and retirement
benefit fund of government employees.

28. 28. The budget may increase or decrease depending on the government’s policy of how much it
will infuse into the economy. Maturing of a country’s debt determines the size of the budget.

29. 29. Obligations Budget vs. Cash BudgetObligations Budget vs. Cash Budget Obligations budget
are for expenditures incurred for the year and is to be paid in said year. This can also be for
expenditures incurred for the year to be paid next year. Aside from this, it is also allocated for
interest payments. Cash budgets are for expenditures incurred for next year. It can also be
allocated for expenditures in previous years, and is also allocated for interest payments.

30. 30. Priority Development Priority Development Assistance Fund (PDAF)Assistance Fund (PDAF)

31. 31. PDAFPDAF The Priority Development Assistance Fund is a lump-sum appropriation
in the annual General Appropriations Act to fund the priority development
programs and projects of the government .

32. 32. PDAFPDAF is used to finance priority development programs and projects identified by the
Members of Congress

33. 33. For the LGU, the amount is released to the Department of Budget and Management as the
fund administrator, which in turn releases the corresponding amount to the LGU beneficiary of
the programs and projects chosen by the legislator

34. 34. How Pork Barrel is createdHow Pork Barrel is created

35. 35. How Pork Barrel is createdHow Pork Barrel is created Step 1: PREPARATION Budget Call Out
◦ The Executive calls out all government agencies and departments to submit a budget for the
next year ◦ Departments and their line agencies submits their budget ◦ Setting of overall budget
policy ◦ Agency-level budget formulation ◦ Executive review, deliberation and approval ◦
Preparation of budget documents and submission to Congress

36. 36. Step 2: Authorization: ◦ Prepared budget is transmitted to Legislative Department for review
and approval ◦ A Bicameral Committee Conference will be held At this point, Members of the
House of Representatives insert some PDAF line items and intelligence funds to some
departments and agencies Approval of the Budget (General Appropriations Act)

37. 37. Step 3: BUDGET EXECUTION ◦ The GAA serves as the legal basis which allows for the use of
funds from the national treasury for specified expenditure items provided therein. However, the
existence of a GAA alone does not imply that agencies can start utilizing and drawing funds to
finance their programs and activities. Agencies need to secure an allotment to be able to
obligate amounts specified in their budgets; cash allocation should also be secured before
disbursements can be made to settle these obligations. The budget execution phase is
concerned with these operational aspects of budgeting which facilitates the translation of
appropriations to disbursements, or more specifically the release of funds through allotments
and Notice of Cash Allocation (NCA)
sources of Revenues; the following taxes are national internal revenue taxes:

1. Income Tax

2. Estate and donor's taxes

3. Value-Added tax

4. Other percentage taxes

5. Excise taxes

6. Documentary Stamp taxes

7. Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal
Revenue