Concept of Public Finance

The concept of public finance deals with the budgeting techniques of the income and expenditures of a public sector organization, normally government or federal organization. Public finance is also termed as government finance and it is an important sector of finance and economics.

The concept of public finance focuses on the following factors:

  • Tax incidence (the party which is actually paying a specific tax)
  • Efficiency of government

The government’s function in accomplishing distribution of income with the help of taxation, transfer payments and government expenditure on commodities
The effectiveness and distribution results of various types of taxes, such as consumption tax and income tax
The ambit of government functions taking into consideration the markets, public goods, and externalities
Supply of commodities and services as prescribed by the government versus voluntary interchange
Public expenditure model, fiscal politics, and taxation policies
The revenue earned by the government by imposing different types of taxes is utilized in various types of public or social utility projects.

The financing process of the government is performed with the help of the following means:

  • Borrowing or taking loans
  • Taxation
  • Seigniorage
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