Guidelines for a Democratic Financial System 10 Democratic Principles for Public Financial Management
It is easy to see from the above events in history and the evolution of democracy itself that several values or principles may serve as guidelines in any democracy today. Tey are: 1. No tax or other charges can be collected from taxpayers without their consent, and the tax burden must be distributed in a reasonable and fair way. Tis, of course, is a very difficult one – is it right to tax some people at a high rate when there are many others who do not pay at all? Of course VAT was introduced to try and lessen this effect. But what of the businessman who says he/she will decrease business output in order to pay less tax? – this directly affects the productivity and growth of a country’s economy. A government should not tax only one section of a community and not another.
2. Utilisation of public financial resources must satisfy the collective needs optimally. Spending money on one project might mean that the resources (funds) are spent more effectively than with another project; this is what is meant by optimum application of resources.
3. Participatory democracy means direct participation by the taxpayers, consumers (users) of the public sector in the financial decision-making process.
4. Public financial decision-making should be fair – financial resources must be applied effectively and efficiently to satisfy collective needs of the public; this means that we demand that there be a reasonable allocation of resources.
5. Only the collective body of elected political representatives has the authority to introduce taxes, to collect taxes, and to decide how and on what they shall be spent.
6. Responsibility & accountability of the elected political representatives is owed to the taxpayers for the collection & spending of taxes and other income. Tose elected into office need to follow this principle so as to engender trust with their constituents. Authority over public money should always be a sacred trust. Once this trust is broken, a government can quickly become ineffective, and the people might begin to refuse to pay tax. (see more under Accountability, p.28). Tis is an extremely important principle.
7. Political representatives must be sensitive and responsive to the collective needs of the community. Te voter should feel that the representative has listened to their needs and that he/she has taken responsibility to solve these needs. Of course this can happen only when the communication channels are operative, so that there is a constant interaction between the voter and their representative. Tis unfortunately does not always happen.
8. Te execution of budget programmes should satisfy the needs of the public; the executive authority (Module 3) should take responsibility to use public funds efficiently and effectively (see p.2 of Module 1 for explanation). Te budget itself is used to gauge what the particular department intends spending on services – this budget is debated in Parliament so that all political representatives from all parties have a chance to see whether these ten principles are being followed or not.
9. Social equity or justice – by maintaining high moral and ethical standards (keeping an eye on corruption) – requires political representatives and public officials to act with integrity (must be honest and responsible). It also means that all decisions should be based on fairness and great care should be taken to ensure that when financial policy is determined as many people as possible benefit. No action should be taken that will advance one group more than another; no group of people should feel they are disadvantaged while another group benefits to a greater extent.
10. All activities regarding public financial management must take place in public and not under the cover of confidentiality. Officials must remain, at all costs, accountable to the taxpayers. All financial transactions should therefore be accounted for in public. See more below.
Case Study: Public Accountability in the East While corruption and mismanagement might result in you losing your job and getting a jail sentence in South Africa, in Eastern countries like China and Japan, the consequences could be far more serious. In China, for example, officials who are found to be corrupt may face execution, while in Japan, the stigma of corruption can cause officials to commit suicide.
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