N6 – Module 7
Consideration of Draft Budget – The executive authority needs to view and approve the draft budget in order for the preparation phase to be complete. The budget department submits one document to the Minister of Finance. The executive authority may now determine whether the draft budget meets the policy directives. They may question whether specific goals and objectives have been met and whether provision has been made for meeting these goals. For example, a new policy to increase funds to primary education may translate into specific policy directives – how to do this. The executive authority will then check to see if the budget makes provision to meet the goals of providing more primary schools, more primary school teachers and an increase in facilities and equipment.
2 Approval
Once the executive authority approves the draft budget, it is then printed and submitted to The Legislature – do not forget that in a democracy only the legislative authority (Parliament) may approve the raising of taxes, and the expenditure of this revenue. The operating programmes of the administrative authorities may not be implemented before this happens. While in the past control of state funds lay with kings, democracy has meant that political representatives have the final say.
These budget documents are submitted to Parliament by the Minister of Finance and this is where the main public interest takes place – the details of the budget are made known to the public via the media. It is understandable that taxpayers will be very interested to know how their money is to be spent – almost every aspect of the annual budget (a compilation of all the various individual departmental budgets) affects the man in the street. Not only individual taxpayers, but also financial institutions, companies, NGOs and other bodies are directly affected. With a change in tax laws and structures financial institutions may have to change the way they operate (their products, such as investment accounts, etc.) and advise their clients accordingly. This could also mean that tax attorneys and accountants have to adjust their clients’ tax returns, investments, etc. It might also mean a change for companies that are involved in import or export as the duties and tariffs might have changed.
For this reason the day the budget is announced is one of the most important days for the country: the budget speech itself is, in fact, one of the most important and popular annual events countrywide each year.
The budget speech is made in Parliament by the Minister of Finance. The main aim of this speech is to announce publicly the plans of the various departments and how they intend meeting the public need and demand for various services. In most cases, individual taxpayers are interested almost exclusively in how much more or less tax they will have to pay each month. The speech itself is divided into a preamble – an overview of the economic, social and political condition of the country. The Minister of Finance might give a broad outline of the social needs, the political goals of his government and the state of the economy in relation to trading partners, the balance of payments, etc. He will then give indication of the financial state of the government itself, with particular reference to public debt – how much has been borrowed, how much is still owed and what interest is being paid. He will then announce new policies and goals and explain increases in expenditure.
Towards the end, the minister announces the tax proposals: changes in income tax, consumer tariffs, etc. Any change in the tax base, tax rate, the subjects, objects, exemptions and deductions (see Module 5, pp.83-85) are announced. This, for the man in the street, is the main portion of the budget – everyone wants to see how much they have to pay. Lastly, the minister will talk of the future, showing especially how the present budget proposals will affect the following financial year.
The budget debate takes place once the budget has been tabled in Parliament – the Council Chamber of the Legislature. It is vital in a democracy that the opposition parties have a chance to challenge the proposals and also offer amendments. Not only the financial aspects of the budget are
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