The following data shows the budget of hypothetical country in2006. Study data and answer the questions that follow: Revenue [$ million] Company tax 240 Wor...

Answer Details

(a) Tax revenue by type

• (i) Direct taxes = Company tax + Workers' income tax \(= 240 + 160 = \$400\) million.
• (ii) Indirect taxes = Excise duties + Taxes on exports + VAT + Import duties \(= 80 + 100 + 150 + 90 = \$420\) million.

(b) Expenditure by type

• (i) Recurrent expenditure = Salaries + Administration + Maintenance of health facilities + Maintenance of vehicles \(= 150 + 200 + 220 + 70 = \$640\) million.
• (ii) Capital expenditure = Construction of roads + Building of schools + Extension of electricity \(= 100 + 120 + 180 = \$400\) million.

(c) Indirect tax as a percentage of total revenue

Total revenue \(= 240 + 160 + 80 + 100 + 150 + 90 + 40 = \$860\) million.

\[\frac{420}{860}\times 100 = 48.84\%\]

(d) Two examples of non-tax revenue: fees and licences; fines and penalties (also rents/royalties, grants and aids, or profits of public enterprises).

(e) Budget surplus or deficit

Total revenue \(= \$860\) million; total expenditure \(= 640 + 400 = \$1040\) million.

\[860 - 1040 = -\$180\ \text{million}\]

Since planned expenditure exceeds expected revenue, it is a deficit budget of \$180 million.