N5 – Module 4 Allocation and Expenditure of Income
Central Government As we saw in Module 1, every government must have a particular ideology which will determine not only how it will govern its people, but also how it will allocate taxing authority at various levels – those levels being, central, provincial and local. There needs to be a working model, a working relationship between these levels. Intergovernmental financial relations refer to this relationship and this is determined by the country’s constitution and the given legislation which begins at central government in Parliament.
Everyone is always in favour of general economy and (in) particular expenditure. Sir Anthony Eden (1897-1977), British Conservative politician, prime minister. Observer 17 June 1958
Governments need to have both shepherds and butchers.
Voltaire (1694-1778), French philosopher, author. Notebooks, vol. 2, “The Piccini Notebooks” (1968 ed.).
One of the main reasons for the existence of the National Council of the Provinces (once known as the Senate), is that it is important for people at a regional level to have a direct say in the legislative process at central government level. Bills or laws affecting different regions or provinces are therefore read and passed in both the National Assembly and also the NCOP.
The various levels of government should logically supplement each other in a reasonable way – this means that the money they collect through taxes and the services they provide should not overlap. It would be foolish for the central government to provide public transport when the local town council has already done so, for example. This logical supplementation therefore requires good intergovernmental relations on, specifically, a financial level, so as to avoid a duplication of taxing or a duplication of spending.
The financial policy of any country should be decided only when the following have been carefully considered and debated, according to Gildenhuys (1993:183): • The political, social and economic policy of the central government with reference to the whole nation;
• The requirements of the constitution; • The demographic situation within the border of a state – the number of people, the concentration of the population and their needs;
• The nature of the government institutions at various levels – central, provincial or regional and local.
If we consider just the first point above we will see that unless a country has a clear ideology it will be difficult to decide who may tax whom, and who should be given the authority to spend public funds. When we speak of centralisation as an ideology, we mean the tendency of a national government to retain control of services, etc. at a central level. Governments do this in order to be able to control all the revenue tax (tax collection) and also the provision of services. In extreme cases, in the past, such as in Communist countries, the government used to revert to widespread nationalisation – see Module 1, p.17 – where industries were run by the state, and were all under the control of one minister. Imagine if this one minister was corrupt – an entire industry, such as mining, electricity supply would be under their control, and if not efficiently run, there would be massive negative spill-over effects.
When a country embarks upon a policy of decentralisation it means the central government encourages individual communities, towns and cities, provinces and regions to provide as many of their own services as possible. This usually means that they are given the authority to collect their own taxes, and make their own decisions, as with a federal system such as in Canada or America.
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