N5 – Module 4
a macro-economic level. A lack of funds will place any government in an embarrassing situation and will directly affect the outcome of the following general election. This is why governments are often anxious about industrial action, lack of productivity, economic strength and the balance of payments with foreign countries.
Equal Distribution A formula for fair, reasonable and equitable allocation of taxing authority and of funds is essential for good intergovernmental financial relations. It is often the case in a centralised government system that the central government enjoys wide taxing authority while leaving local governments impoverished and unable to provide essential services. This is obviously unfair.
This equal distribution should take place on a vertical level – down from the central government to the regional and local, and also on a horizontal level – between regions or local authorities on the same level. J.J. Hattingh in Hanekom (1986:105) says that “Local authorities should also take note of the relations within their respective authorities (intragovernmental relations) and their relations with non-governmental institutions (extragovernmental relations).” This is important so as to avoid the situation where one town or region enjoys priority over another. Imagine a family with a number of children – many who are claiming they are being unfairly treated, and one may have some idea of what many central governments have to put up with!
Acquisition of Income The central government receives its income from the citizens of the country, from trading itself and also from investment. The various sources are listed below:
Tax (see more details about type of tax in Module 5) • Income tax from taxpayers (personal income tax); • Interest on dividends received by investors; • Customs and excise duties – charges for imported equipment, luxury goods, etc.; • Value-added tax (VAT); • Tax on foreign shareholders; tax on profits; • Fringe benefits tax – (many people receive benefits such as motor car allowances, housing subsidies, etc. These are all taxed);
• Tax on international trade transactions; • Ad Valorem (tax based on assessed value, such as property tax which is the main source of income for local municipalities, and also on imported goods – it is one of the main reasons cars in SA are more expensive than most other countries...);
• Airport tax.
State Enterprises The state sometimes runs profitable enterprises that generate income which the government then uses to finance its budget. Examples are: • The state printer; • Timber plantations – throughout its history SA has had vast commercial forests or plantations;• Administrative services;
• Transport services; • Waterworks.
Levies • Registration fees; • Rent from letting state property.
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