The National Budget is the bread and butter of the government. Without a budget, the government can not operate. What is a budget? What are the types of budget? How do they prepare the national budget? What are the sources of funds? Hereâ€™s a simple illustration on how they prepare the national budget and the sources of funds â€“ the many taxes that people pay.
The National Budget is the bread and butter of the government. Without a budget, the government can not operate. What is a budget? What are the types of budget? How do they prepare the national budget? What are the sources of funds? Here’s a simple illustration on how they prepare the national budget and the sources of funds – the many taxes that people pay.
What is a national budget? The National Budget is the money or public fund utilized by government in all its activities, projects and operations. The money comes from the amount collected by the Bureau of Internal Revenue or BIR. This agency has the authority and responsibility to collect taxes, tariffs, services fee, fine, penalties and others. Expenses and income should be balance to avoid deficit because it will affect the credibility and steadiness of the government.
Types of Budget
What are the types of Budget? There are two types of budget – the Line Item Budget and the Performance Budget. A Line Item Budget declares all the items of expenditures. All positions in the government and their respective salaries are included. On the other hand, a Performance Budget is the allocation of total expenditures for each government activities.
Preparation of National Budget
The national budget is prepared by the government every year. It is called the “General Appropriations Act”. Each head of government agencies and institutions must submit to the Commission on National Budget a budget proposal for the whole year. It is from these proposed budgets where the commission based the National Budget.
The budget is presented to the President of the Philippines then the President presents it to the Congress of the Philippines within 15 days prior to the opening of its regular session. It is the task of the Congress to make a law regarding the proposed-budget for a specific year.
Sources of Fund of National Budget
The Gross National Product or GNP is one way of measuring the status of a country’s economy. The Gross Domestic Product or GDP and the Dollar Remittances of Overseas Filipino Workers are also barometers in determining the economic situation of the country.
Here are some of the most important sources of funds for the National Budget – the many taxes that people pay:
Foremost and primary source of fund for the National Budget is the Income Tax. It is based on citizenship, residence and source of income. This tax is imposed to the Filipino people, the state, tourists and corporations.
Excise tax is the tax collected to the producers, retailers, businesses that sell special products such as cigar & cigarette, gasoline, petroleum, cars, mineral products and others.
Inheritance Tax is another source of fund for the National Budget. It is the amount collected to people who inherited properties based on the amount or appraisal of the inheritance.
Percentage Tax is the amount imposed by the Bureau of Internal revenue to contractors, hotel owners, restaurants, recreational institutions, winnings such as Lotto and products from the forests.
Miscellaneous Tax is another source of fund for the National Budget. It is the amount collected to banks, premium insurance, franchise and financial companies.
Value Added Tax
Value Added Tax or VAT is the tax from all the products being sold, exchanged and bartered; commercial services; and, importation of products. Commercial ads for Television and radios, videooke bars, malls, restaurants and many others pay Value Added Tax. The amount collected is 10% of the product or service price.
Residence Tax is the tax paid by Filipinos every year. It is usually obtain from the Municipal/city hall. The amount paid is based on the income of the individual.
The film-making industry also pays taxes and all citizens with motor vehicle pay taxes by registering their vehicle to the Land Transportation Office or LTO.
*Expanded Value Added Tax or E-VAT
Expanded Value Added Tax or E-VAT is an additional burden to the tax-paying public. The BIR imposed 12% additional tax to selected services and products such petroleum products and fastfood chains. The amount collected is not included to the National Budget but it goes straight to the President's Special Fund.