Name: CYRIL THERESE G.
YSATAM Date: December 19, 2023
FISCAL ADMINISTRATION: ISSUES AND PROBLEMS
1. What are the key challenges and issues in diversifying government revenue
sources to ensure fiscal sustainability? How can a government balance the need
for revenue generation with concerns about tax fairness and economic efficiency?
Answer:
The key challenges and issues in diversifying government revenue
resources are over reliance on a revenue stream which makes the government
prone to economic fluctuations and limits its ability to respond efficiently to changing
fiscal needs, uneven distribution of tax burden to different sectors, inefficiencies in
tax administration which can be addressed by modernizing tax administration
processes and investing in technology, corruption and governance issues, policy
and legislative barriers, and social and political resistance to tax reforms,
It is important for our government to diversify our sources of income in order
to ensure fiscal sustainability and minimize dependence on a single source. Finding
a balance between raising revenue and reducing the load on taxpayers is one of the
major challenges. The effect that new taxes will have on social fairness and
economic progress must be carefully considered by our government.
Dealing with tax evasion and avoidance presents another difficulty because
these practices can drastically lower government revenue. To maintain equity and
optimize revenue collection, it is imperative to put into place efficient
countermeasures against these tactics. Governments also need to think about the
long-term effects of tax breaks and incentives since they can affect the way money
is collected.
Our government must also look into new and creative sources of funding that
are sustainable and compatible with shifting economic conditions.
2. How can fiscal policies be designed to address issues such as budget
deficits, public debt, and the potential impact on economic stability?
Answer:
It takes thought and planning to create fiscal policies that handle problems
like public debt, budget deficits, and their effects on economic stability. Here are
some crucial things to remember based on my readings:
Budgets that are balanced and fiscal restraint. Target a balanced budget over
the whole economic cycle. This entails maintaining surpluses during economic
upswings and deficits during downturns.Practice fiscal restraint by refraining from tax
cuts or extravagant expenditure that might result in unmanageable deficits.
Policies that Counter Cyclicals. To stabilize the economy, apply
countercyclical fiscal policy. During recessions, the government should raise
expenditure and lower taxes to boost demand; during economic expansions, the
opposite should be done to avoid overheating.
Sustainability of Debt. Track and control the amount of governmental debt to
guarantee sustainability. A manageable debt load is one that does not increase
more quickly.
3. How can a government address issues of fiscal decentralization, revenue-
sharing, and ensure that sub-national entities have the necessary fiscal
autonomy while maintaining overall fiscal discipline?
Answer:
A careful balance between ideals and workable solutions is needed to
address challenges of fiscal decentralization, revenue-sharing, and guaranteeing
fiscal autonomy for sub-national institutions while upholding overall budgetary
discipline. Some strategies a government may want to think about is first simple and
clear legal structure which means to provide a precise legal framework outlining the
obligations and authority of subnational organizations with regard to borrowing,
spending, and taxing. There should be a balance between accountability and
autonomy under this legal framework.
Second is to own sources of income.Encourage subnational organizations to
collect local taxes in order to create their own revenue. This could apply to sales
taxes, property taxes, or additional local taxes. Offer rewards for effective revenue
administration and collection.
Third is to provide equalization grants to regions that are less wealthy in order
to reallocate resources and make sure that every region have a fundamental degree
of financial capability. This lessens the differences in infrastructure and service
delivery between regions.
Financial Regulations is also essential. Establish and implement fiscal
regulations to direct subnational entities' financial actions. To maintain general fiscal
discipline, these regulations may include restrictions on deficits, debt levels, or other
fiscal indicators.
Fifth is the Building Capacity.Invest in enhancing sub-national governments'
ability to handle their finances, create budgets, and collect taxes. This improves their
capacity to effectively and openly manage financial resources.
Grants Based on Performance should be implemented. Grants and transfers
should be conditioned on how well subnational organizations accomplish particular
developmental goals. This promotes sensible financial management and effective
resource utilization.
Next is that Multi-year budgeting should be used to give subnational entities
more financial predictability. They can plan for longer-term initiatives and activities
while maintaining financial restraint thanks to this.
Another strategy is to strengthen public involvement. Involve the general
public in national and subnational budgetary processes. Increased accountability,
openness, and public support for fiscal decentralization can result from this.
In every implementation of rules observation and assessment are crucial for
continuous improvement. The government must provide strong monitoring and
assessment systems to evaluate subnational entities' financial performance. Regular
audits, performance evaluations, and procedures for taking remedial action when
necessary are all included in this.
4. How can governments address the challenges associated with rising public
debt levels, especially in the context of economic downturns or crises?
Answer:
A varied and calculated approach is needed to address the issues brought on by
the Philippines' growing public debt, particularly when dealing with economic downturns
or crises.
The Philippine government may first adhere to put into practice sensible financial
policies to guarantee responsible management of revenues and expenditures. This is to
gain the confidence of the public and investors, increase the transparency of financial
reporting and budgeting. Next is to create a solid debt management plan to maximize
the amount and composition of public debt. Reduce the reliance on commercial
borrowing by exploring international organizations for grants or concessional loans, and
diversify our sources of funding. Another is to adopt economic changes that support
equitable and sustainable growth which can improve the nation's ability to pay off its
debt.
It is also very essential to improved revenue generation. Expand the tax base
and improve tax administration to boost government revenue without taking on more
debt.To guarantee justice and equity in the tax system, think about implementing
progressive taxation and examining tax incentives.To lessen the effects of fiscal
consolidation on vulnerable populations, protect vital social spending, especially in
sectors like social welfare, healthcare, and education.
As we have experienced recently with Covid emergency preparedness is
important to better survive economic downturns. The government must create
budgetary buffers and contingency plans during periods of economic boom.
Also, In times of economic strain, work together with international financial institutions
and other nations to obtain financial support, technological know-how, and policy
recommendations. Investigate and encourage carefully crafted public-private
partnerships to fund important infrastructure initiatives without appreciably raising the
national debt. But before we coordinate outside our country, the public must be
informed in a straightforward manner about the government's economic policies and the
thinking behind decisions made about debt. Engage stakeholders to promote a
cooperative approach to tackling economic difficulties, including the corporate sector
and civil society.
The Philippine government might attempt to lessen the difficulties brought on by
growing amounts of public debt by combining these steps, particularly during recessions
or other economic downturns. This strategy seeks to reconcile the requirement for long-
term economic growth with fiscal discipline.
