The tables below show the expected revenues and projected expenditures from the budget of a hypothetical country in 1998. Use the information in the tables ...
Question 1 Report
The tables below show the expected revenues and projected expenditures from the budget of a hypothetical country in 1998. Use the information in the tables to answer the questions that follow.
EXPECTED REVENUE
| ITEM | AMOUNT ($ millions) |
| Rents, royalties and profits | 75.00 |
| Company income tax | 150.00 |
| Customs and excise duties | 300.20 |
| Personal income tax | 80.00 |
| Fees specific charges | 60.80 |
| Value added tax | 100.00 |
PROJECTED EXPENDITURE
| ITEM | AMOUNT ($ millions) |
| General administration | 220.10 |
| Maintenance of foreign missions | 50.00 |
| Transfer payments | 65.00 |
| Building of schools and hospitals | 200.00 |
| Road construction | 180.90 |
(a) Calculate the total revenue from
(i) direct taxes [3 marks]
(ii) indirect taxes [3 marks]
(iii) non-tax sources [3 marks]
(b) Determine the total
(i) capital expenditure [3 marks]
(ii) recurrent expenditure [3 marks]
(c) Determine whether the budget is a surplus or deficit. [5 marks]
Answer Details
(a) Revenue by source
- (i) Direct taxes = Company income tax + Personal income tax \(= 150.00 + 80.00 = \$230.00\) million.
- (ii) Indirect taxes = Customs and excise duties + Value added tax \(= 300.20 + 100.00 = \$400.20\) million.
- (iii) Non-tax sources = Rents, royalties and profits + Fees and specific charges \(= 75.00 + 60.80 = \$135.80\) million.
(b) Expenditure by type
- (i) Capital expenditure = Building of schools and hospitals + Road construction \(= 200.00 + 180.90 = \$380.90\) million.
- (ii) Recurrent expenditure = General administration + Maintenance of foreign missions + Transfer payments \(= 220.10 + 50.00 + 65.00 = \$335.10\) million.
(c) Surplus or deficit
Total revenue \(= 75 + 150 + 300.20 + 80 + 60.80 + 100 = \$766.00\) million.
Total expenditure \(= 380.90 + 335.10 = \$716.00\) million.
\[766.00 - 716.00 = +\$50.00\ \text{million}\]
Revenue exceeds expenditure, so the budget is a surplus of \$50 million.
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