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The Role of Government in An Economy

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23 views15 pages

The Role of Government in An Economy

Uploaded by

Sahai lm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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THE ROLE OF

GOVERNMENT IN
AN ECONOMY
SECTION NINE
RESPONSIBILITIES OF
GOVERNMENT
•Security of the State
•It
should create and uphold appropriate legislation
and operate courts of justice. The establishment of
security forces that are equipped with the necessary
resources to provide internal and external defense

•Protection and general welfare of citizens


•The provision of welfare such as healthcare,
education and poverty alleviation measures e.g.
PATH. Citizens abroad can rely on the diplomatic
offices to safeguard their interests
RESPONSIBILITIES OF
GOVERNMENT
•Job security and severance benefits to workers
•Passing laws that ensure that citizens can have stable
employment e.g. Jamaica’s Labour Relation and
Industrial Dispute Act 1975 and are compensation where
there are breaches or termination of service by the
employer

•Protection of the environment


•Passinganti-pollution laws to protect the air, land and
water. They can also pass laws to protect the depletion of
animal life e.g. birds, fish and natural resources e.g. coral
reefs
RESPONSIBILITIES OF
GOVERNMENT
•Maintenance of a safe environment for investors
• Creatingsound economic policies that will protect the
interest of investors. This also include the setting up of the
legal framework to protect depositors and businesses e.g. The
Financial Services Commission Act 2001

•Regulation of business activity in terms of providing


clear guidelines as how to set up businesses
• This
includes laws pertaining to the registration of companies
and the filing of tax returns
How can government influence
businesses to protect the
environment?
This is done by creating a Policy or legislation on:
• Green technology: technology whose use is intended to mitigate or
reverse the effects of human activity on the environment. E.g. solar

• Reforestation

• Proper disposal of waste

• Zoning laws: dictate how real property can and cannot be used in
certain areas

• Theappropriate use of technology in production and disposal of


wastes
THE REASONS FOR
TAXATION
It is said that there are two things in life that certain
death and taxes. Governments may tax its citizens
for various reasons:

•tocontrol inflation by reducing the supply of money


in the economy

•toremove competition from local goods in order to


protect infant or fledgling industries by taxing imports
at high rates
THE REASONS FOR
TAXATION
•tolower import by encouraging persons to buy
local produce thus encouraging linkages among
sectors

•to
achieve greater equality in the distribution of
wealth and income by taxing the higher income
earners so as to provide social services for the
majority of citizens.

•To raise revenue to finance the budget


TYPES OF TAX SYSTEMS
•Progressive Taxation
• This
is where a greater percentage of tax is taken from the
individual as his/her income rises
•Proportional Taxation
• This
is where each taxpayer pays the same percentage of tax
regardless of the size of the income e.g. Income tax of 25%
across board
•Regressive Taxation
• Thistakes a greater proportion of tax from persons who earn
less income
CLASSIFICATION OF TAXES
•DIRECT TAXES •INDIRECT TAXES
• Theseare levied on •These are levied on
income and wealth spending on goods and
(capital) and is paid by services and is paid in
individuals by businesses

• Refer
to those taxes •referto those taxes
where the burden of the
taxes and the payments of where the burden and
them fall on the same payment of the taxes
individual fall on different
individuals
CLASSIFICATION OF TAXES
EXAMPLES OF EXAMPLES OF
DIRECT TAXES: INDIRECT TAXES:
• Income tax • Custom duty

• Corporation tax • Excise duty

• Capital gains tax • Purchase tax

• Capital transfer tax • Stamp duty.

• Land (Property) taxes • Consumption


tax such as
GCT, SCT, and VAT
Forms of Government Assistance
•Loans: money can be made available at reduced rates
of interest to qualified people interested in starting a
business. The process is usually less rigorous than the
formal banking system and could include funding for
agriculture, export and marketing

•Technical Assistance: the government may choose to


offer technical assistance in functions that small and
micro businesses are often poor at. This could include
accounting and record keeping, marketing and
distribution, and satisfying legal requirements. This
could be done through training and development
Forms of Government Assistance
•Research and Information Centres: the ministry
responsible for growth and development of small
businesses may develop a database of case studies that
model best practices in starting up and operating a
business.

•Subsidies and grants: a subsidy arrangement is an


agreement that the government will cover part of a
producer’s production cost if the producer promises to
reduce his selling price by this amount.
A grant is money that is given to a recipient who can
demonstrate that he/she needs it. NB it is not a loan but a
gift with conditions
Forms of Government Assistance

•Incubators: An incubator is a centre that offers new


businesses low-cost offices with basic business
services such as accounting, legal advice and
administrative assistance. Incubators are designed to
support businesses in the critical stage of early
development and thus increase their chance of growing
into large businesses
Social Services Provided by
Government

•Healthcare

•National insurance (NIS)

•Education

•Roads and transportation


Graded Group Work
1. What kind of taxation system exists in your country:
it is regressive, progressive or proportional? How do
you know

2. Many people have argued that they pay too much tax. These
people have suggested that governments should get rid of income
taxes and increase indirect taxes such as General Consumption
Tax (GCT). How will this affect such things as:
a) The revenues that the government collect?
b) The extent to which it disadvantages the poor or the rich?
c) How easy it would be to collect such taxes
d) The level of tax evasion possible?

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