Public Finance in Australia

Transcription

1 Public Finance in Australia THEORY AND PRACTICE Third edition Peter Groenewegen Professor of Economics, The University of Sydney Prentice Hall New York London Toronto Sydney Tokyo Singapore

2 Contents Preface to the Third Edition ix Extract from Preface to the First Edition x List of Figures List of Tables xii xiii Chapter 1 Introduction 1 Definition of public finance I. Government bodies 5. The Australian public sector 5. Nature of the State 8. Public finance in socialist economies 11. Public finance and developing countries 12. An economics or a political economy of public finance? 12. Summary 13. Notes 14. Further reading 16. Chapter 2 The scope of government activity and the Budget process 17 Government functions and Budgetary functions 17. The distinction between expenditure and taxation 18. The Budgetary functions of Australian government 19. The Budget 22. The functions of the Budget 23. Conflicts and trade-offs in the government objectives 26. The annual Budget cycle 29. Summary 32. Notes 33. Further reading 35. Chapter 3 The growth of the public sector 37 Statistical problems in public sector growth measurement 38. Alternative approaches to public sector measurement 39. The growth of the public sector: some explanations 41. The effects of economic growth on public sector outlays 41. The displacement effect and the concentration process 44. Inflation and public sector growth 45. Bureaucrats as an influence on public sector growth 45. Are there natural limits to public sector growth? 45. The growth of public expenditure in Australia 47. Summary 52. Notes 54. Further reading 55. v

3 vi Contents Chapter 4 The pure theory of public expenditure 57 A sequential view of public expenditure decisions 57. The total level of public expenditure 58. An exposition ofsamuelson's pure theory 59. The maximum welfare approach 63. The relative size of the Budget programs 65. Social choice and fiscal politics 67. Median voter analysis and fiscal decision-making 72. An economic theory of democracy? 72. Summary 73. Notes 74. Further reading 76. Chapter 5 Public expenditure evaluation and incidence 77 Some definitional issues in public expenditure evaluation 77. The set of specific objectives within a program 78. Planning-programming-budgeting 79. The design of accepted projects to be implemented: cost benefit analysis 81. Public expenditure and income distribution: incidence analysis 85. Public expenditure, stabilisation and growth 88. The economist and public expenditure analysis 88. Summary 88. Notes 90. Further reading 92. Chapter 6 Taxation: an introduction 93 The development of the Australian tax structure 93. The classification of taxation 95. Direct and indirect taxation 101. International tax comparisons 102. Glossary of tax terminology 105. Summary 109. Notes 110. Further reading 111. Chapter 7 Principles of taxation 112 The ability to pay principle 113. The benefit principle 114. The modern criteria of taxation: equity, efficiency, simplicity 117. Equity or fairness 117. Efficiency 118. Simplicity 120. Other considerations in tax policy 121. The principles of taxation and tax reform 122. Summary 122. Notes 123. Further reading 125. Chapter 8 The incidence of taxation 127 The nature of "tax burdens" 128. Three concepts of incidence: absolute, differential and Budget incidence 128. The time period of the analysis 129. The incidence of specific taxes 130. Alternative approaches to the theory of tax incidence 130. The general equilibrium approach to tax incidence theory 130. The post-keynesian (Kaleckian) approach 133. The fiscal incidence of the tax structure 135. Summary 138. Notes 139. Further reading 141. Chapter 9 Personal income tax 143 The tax base 144. The Medicare levy and Higher Education Contribution 145. Some theoretical issues of the income tax base 146. Further issues relating to the income tax base 148. Differences between the Australian income tax base and the Simons' accretion concept of income 152. Capital gains taxation 152. The rate structure 155. Proportional or progressive income taxation? 157. Linear income tax 158. Proportional or flat rate income tax 158. Economic effects of the Australian personal income tax 159. Avoidance

4 Contents vii and evasion 159. Personal income tax and income distribution 161. Personal income tax and incentives 162. Income tax, stabilisation, and economic growth 163. Summary 164. Notes 165. Further reading 167. Chapter 10 Company income tax and business taxation 169 The tax base 170. Issues relating to the company tax base 170. The company tax base and inflation 173. Fringe benefits tax 174. Superannuation 175. The rate structure 176. Further issues in company taxation 177. Equity consequences of the classical system 178. Efficiency consequences of the classical system 178. The integration proposal 178. A split rate system 179. Other forms of dividend relief 179. Company tax imputation 179. The continuing case for separate company taxation 181. Company tax and resource allocation 181. Resource rent taxation 181. Company tax and the distribution of income 182. Company taxes: stabilisation and growth 183. Summary 183. Notes 185. Further reading 187. Chapter 11 Wealth and property taxation 188 Capital taxes and taxes on capital 189. The annual tax on net wealth 189. Death and gift duties and inheritance taxation 193. The capital levy 195. Specific property taxation: the taxation of land 196. Local rates 196. Land tax 198. Summary 199. Notes 201. Further reading 202. Chapter 12 Broad-based consumption taxes 204 Value added tax (VAT) 205. Other general forms of consumption taxation 209. The retail sales tax 209. The wholesale sales tax 210. The direct expenditure tax 211. Choice of instrument for broad-based consumption tax reform 212. Summary 213. Notes 215. Further reading 216. Chapter 13 Miscellaneous transaction taxes 217 The tax base 217. Excise 218. Business franchise taxes 219. Gambling taxes 219. The rate structure 219. Economic considerations of partial outlay taxes 220. Stamp duties and other transaction taxes 221. Financial transaction taxes 223. Financial institutions duty 223. Bank account debits tax 224. Payroll tax 224. Summary 227. Notes 228. Further reading 230. Chapter 14 Fiscal federalism: theoretical considerations 231 The merits of decentralised government 231. The optimal fiscal community 233. Allocation of functions in a federation 236. The allocational functions 236. The tax assignment issue 237. The distributional functions 238. The stabilisation and growth functions 239. Further fiscal problems in a federation 240. Hierarchy and theory of grants 241. General grants: objectives and consequences 241. Specific purpose payments 243. Summary 243. Notes 245. Further reading 246.

5 viii Contents Chapter 15 Australian fiscal federalism 247 Function assignment in Australia's federation 247. Vertical fiscal imbalance in the Australian federation 248. Solutions to the fiscal problems of Australian federalism 250. Horizontal fiscal imbalance in the Australian federation 253. Correcting horizontal fiscal imbalance in a federation 253. Specific purpose grants 260. Whither Australian federalism? 263. Summary 263. Notes 264. Further reading 266. Chapter 16 State, local and regional government finance 267 State financial reform 267. Alterations in tax assignment for the States 270. Problems of local government finance and regional development 271. Expanding local government functions 273. Expanding local government revenue sources 273. Regionalism: a fourth tier of government? 274. Summary 276. Notes 277. Further reading 278. Chapter 17 Financing government: the public debt 279 Financing government 279. The anatomy of Australia's public debt 281. Maturity structure of the debt 285. The term structure of interest rates 286. The growth of the public debt 288. Issues of debt management policy 290. Further aspects of government finance and monetary policy 291. The Loan Council and government borrowing 292. Further considerations on the public debt 293. Financing by taxation or by borrowing? 294. The burden of the public debt 296. Summary 297. Notes 298. Further reading 300. Chapter 18 Fiscal policy for stabilisation 301 The objectives of stabilisation policy 302. The full employment objective 302. The objective of price stability 303. The instruments of stabilisation policy 303. Targets and instruments 304. An elementary view of fiscal policy 305. Automatic stabilisers and fiscal drag 307. Further issues in the theory of fiscal policy 308. Australian fiscal policy experience 311. The expansionist viewpoint 312. The restrictionist approach 313. Whatis thefutureof fiscal policy? 315. Summary316. Notes317. Further reading 318. Chapter 19 International public finance aspects 319 Equity problems in an international setting 320. Efficiency considerations in international business tax arrangements 322. Capital import/export neutrality 324. Is neutral taxation possible in an open economy? 325. Further issues in international taxation: tax competition and tax harmonisation 326. Stabilisation in the open economy 327. Domestic and overseas balance or Budget outcome 327. Summary 329. Notes 330. Further reading 332. Chapter 20 Whither public finance? 333 Is Leviathan coming? 334. Public sector size and economic growth 336. Social welfare, minimum income schemes and negative income taxes 340. Public finance, pollution and protection of the environment 343. The continuing role for the public sector 344. Summary 345. Notes 346. Further reading 348. Index 349