public finance essay

public finance essay

The Importance of Public Finance in Society

1. Introduction

Budget policy, as approved in the Republic of Azerbaijan Constitution, is implemented by the relevant laws of the Parliament of the Republic of Azerbaijan. The state budget is consistent with the budget legislation and the principles approved by it. The basic principles of budget policy are to create provisions that correspond to income possibilities and, in connection with this, to use financial resources for the development of social production and social services in the most efficient way. This includes creating a financing policy consistent with state social development programs and the implementation of additional and specific measures. The finance ministry also guarantees the financial stability of state monopoly enterprises and the financial and credit systems of the Republic.

The role of the finance ministry involves the performance of economic activities. This includes leadership in the formulation of tax policy, fiscal policy, determination of tariffs, state loans, and municipal property policy. It also includes addressing stock, credit, and antimonopoly policy. The finance ministry is responsible for the formation of price lists and, together with the authorized body of the executive authority, other forms of rates and price limits of regulation. Additionally, the finance ministry determines the standard of living and poverty level, as well as the directions and normative payment mechanisms for their regulation. The ministry also participates in the management of the intergovernmental transfers system and provides and realizes the state members of the economic development and the efficient use of resources.

2. Role of Public Finance in Economic Development

Economic activities mean using manpower and other factors to fulfill social wants. If the private sector cannot fulfill these wants properly, the topmost use of these factors may not be possible. Socio-economic disparities can be eliminated. Now the importance of public finance should be pointed out. Most of the economic activities are capital-intensive, but labor remains unemployed due to the mechanism of development planning based on the price mechanism. Through public finance, the use of these factors may lead to a maximum level ideally through the mechanism of price and other constraints applied to these factors. Incentive can be provided for the profitable employment of the resources. The unemployment problem cannot be solved. Through public finance, the resources will be utilized for the development projects at their best. At the same time, inflation will be avoided. Furthermore, the government will encourage such areas that are necessary for the economic development of the country.

The role of public finance in economic development is equally of great significance. No country can ensure its economic and social development without putting public finance as an effective tool of development to work. It includes maximum goods and services for the satisfaction of human wants. In the struggle for development, public finance can be a strong weapon. A country cannot result in taking advantage of the limited resources unless it makes the production of these goods and services possible. Every society has unlimited wants. But the resources available for fulfilling these wants are quite limited. The main objective of public finance is the maximum social advantage. So, public finance is often considered as the best guardian of economic development. In the underdeveloped countries, according to Arthur Lewis, the government is “the only institution which substitutes the use of force for the price mechanism in the allocation of resources.”

3. Key Principles of Public Finance

Although our modern systems include many of these practical solutions, these systems are mostly established on a theoretical foundation. Accordingly, the essential principles of public finance form a normative science. Nevertheless, one cannot avoid the issue that public finance involves a large number of scientific studies beyond the theoretical grounding. These studies contribute to clarifying the theoretical fundamentals, thus leading to practical improvements that belong to the realm of practice. Random practices, the absence of right, and equality, the adoption of the truth, lay the foundation of the many theories that correspond to the analyses conducted in view of the above disciplines. Political economy analyzes the laws governing the economies in this light, and the standing polity of states measures the physical state of communities serving the same purpose. Similarly, public finance as a science is dedicated to defining these various relationships and then devising appropriate measures to implement within the scope of fiscal law.

3) Public finance as a fiscal science: Public finance is measured from the standpoint of how it affects society’s well-being in general and in particular, and how it solves the problems arising in the everyday affairs of state. It is not enough to analyze the state’s financial matters and call this public finance. Without a doubt, one area forms the underlying aspect of this analysis. The subject matter of public finance is fiscal law. In a certain sense, public finance consists of the analysis of the many various financial arrangements that exist in fiscal law. As a result, public finance is strictly related to jurisprudence. However, public finance is more than mere theoretical research. The primary concern is looking at whether public finance provides practical solutions.

4. Challenges and Solutions in Public Finance Management

INADEQUACIES IN REVENUE RAISING: Our public finance systems are not set up to raise the necessary revenue. Progressive taxation is now very popular. It is, however, only successful to the extent that the rich submit honest income and exports are accurately reported. The general business scan reveals the fact that unregistered small and medium enterprises are not submitting records of their income or expenditures, and their VAT claims are generally not supported by proper documentation such as tax invoices. Another shortcoming of the existing tax system is that about 50% of the tax revenue is collected from direct players such as the mines, the financial sector, the industrial and manufacturing sector, and government. This means that the tax changes have mostly been on these players since 1992. The result was that others in the general business scan benefited from the tax breaks. For the donor community, only the mines, the ZRA, and the financial sector do their part in raising revenue.

A. Managing public finance is very challenging even in developed countries. Managers have to protect the public interest at all times and must operate transparently. This is much harder when income is in the hands of the few, heat and light are in great demand, and other social problems are severe. Furthermore, public finance management has evolved in Britain and elsewhere over centuries in an environment that is completely different from that of, say, Zambia or a refugee camp. What appear to be weaknesses may actually be constraints that are difficult to overcome and may not exist in developed countries. The main economic challenges in Zambia or refugee camps are poverty and income distribution. The public finance systems are designed to address these problems, and it should therefore be sufficient to direct revenue at the poor and the vulnerable. The answer is that, in the main, they do not, despite the increasing need to direct funds at the poor and the vulnerable, directly or indirectly. The evidence of this is that government consumption is very inefficient, and total consumption is no higher when the government directs more revenue at the poor and the vulnerable. This, in turn, says that creating fiscal space for poverty reduction is very challenging.

5. Conclusion

Bearing in mind a society with quality, in which development affects both economic and productive growth, individuals need knowledge in economics. Particularly, they must learn and understand the functioning and relevance of public finance in a state. With the knowledge acquired, they will contribute to a society that navigates with better abilities because they are called to form their own opinions on financial issues, participate, and make decisions based on reality. Quality human beings are created with first-class training, not just an academic program. Establishing criteria in financial knowledge and awareness inspires leadership and a good life, or what is called a virtuous life. As a consequence, the impact of financial education in improving quantitative aspects implies participation and collaboration, which strengthens the stability of the economic system and generates renewable, sustainable, and high potential.

In the end, I would note that there are three fundamental aspects to consider in public finance. First, taxes are the main source of funding for the state and covering its costs. Second, the services provided by the state to society are wide and varied. It can be concluded that without the state, there would be no peace, justice, order, defense, and infrastructure, among others. The third and most important aspect is that the collection of taxes from individuals provides better living conditions and opportunities, reduces or eliminates inequalities, etc. In short, the existence and work of the state require public finance. Hence, the relevance and importance of public finance in human life from the point of vocational training. In terms of labor, knowledge of public finance through education strengthens the capacity for leadership and decision-making. It establishes a strong society that begins by understanding and participating in problems and solving issues that affect the state and society.