(f) Maintain control of government finance All governments need to spend money to pay for public services. This spending has to be paid for out of current taxes or from borrowings. Government finances need to be carefully managed to avoid excessive spending, taxes or borrowing.
LO 3.2 3.7 3.10 3.11
2. How do governments intervene in the economy? As Taoiseach, Sarah Feeney is keen to influence the economy to promote economic growth, reduce unemployment, protect the environment and reduce inflation. Around the world governments use a variety of policies to intervene in the economy. Economic policies are the goals to be achieved by governments and the methods they will use to achieve them. These policies may be grouped under three main headings.
Fiscal Policy LO 3.4
3.5 3.9 3.10 3.11
Monetary Policy Regulatory Policy
3. What is fiscal policy? Fiscal policy refers to the ways in which a government can influence an economy through the use of government income (revenue) and expenditure. Like most households and businesses, every year the government prepares its own budget for the coming year. It sets out what taxes and other income will be collected and where the money will be spent.
Sources of government income:
Government income can be divided into two types: Government current income is money that the government receives regularly. This revenue comes mainly from taxes and is the most important source of income for the government. Government capital income is money the government receives occasionally or one time only. This is usually in the form of EU grants or income from the sale of valuable assets including land, buildings and State-owned companies.
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Current Income (mainly taxes) Income Tax
Value Added Tax Excise Duties Corporation Tax Stamp Duties Other taxes
Capital Income EU Grants
Sale of State assets Dividends from State companies 398
Taxes on wages and salaries Taxes on goods sold
Taxes on fuel, cigarettes and alcohol Taxes paid on company profits Taxes paid on property sales
