The following data shows the budget of hypothetical country in2006. Study data and answer the questions that follow: Revenue [$ million] Company tax 240 Wor...
Question 1 Report
The following data shows the budget of hypothetical country in2006. Study data and answer the questions that follow:
| Revenue | [$ million] |
| Company tax | 240 |
| Workers' income tax | 160 |
| Excise duties | 80 |
| Taxes on exports | 100 |
| Value added tax | 150 |
| Import duties | 90 |
| Non-tax revenue | 40 |
| Expenditure | [$ million] |
| Construction of roads | 100 |
| Building of schools | 120 |
| Payment of workers' salaries | 150 |
| Government administration | 200 |
| Maintenance of health facilities | 220 |
| Extension of electricity to rural areas | 180 |
| Maintenance of official vechicles | 70 |
(a) How many revenue was realised from:
(i) direct taxes;(3 marks) ,(ii) indirect taxes (3 marks)
(b)Calculate the total:
(i) recurrent expenditure (3 marks) ,(ii) capital expenditure (3 marks)
(c) What pencentage of total revenue was collected as indirect taxe? (3 marks)
(d) State two examples of non-tax revenue (2 marks)
(e) What was the budget surplus or deficit? Explain your answer. (3 marks).
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.
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