State Budget Structure: Revenue and Expenditure
Introduction: The Role of the State in the Capitalist System
In the capitalist system, states have dominated the economy, acting as major economic agents. They either directly participate in economic activities or indirectly encourage the private sector. State involvement has evolved significantly since the 20th century. Initially, there was a classical conception of the liberal state, where intervention was limited. This evolved into an interventionist state that assumes multiple economic and social responsibilities. These include:
- Provision of public goods and services (education, health)
- Production of goods (water, electricity)
- Implementation of social benefits and pensions
- Promotion of regional development
To fulfill these objectives, states must spend a significant amount of money. The higher the objectives or system inefficiencies, the greater the funding required. This spending is financed through government revenue, which is not an end in itself but a means to achieve public functions. The state’s collection of revenue is therefore an instrumental activity.
The document that outlines the state’s activity and the objectives of economic and fiscal policy is the budget.
General Structure of the State Budget
The state budget is a primary tool for fiscal policy, and fiscal policy is the most efficient tool for state intervention in the economy. Monetary policy is largely grounded in the efforts of the Central Bank. State budgets generally have two main components:
- Estimates of income (revenue budgets)
- Estimates of expenditure (expenditure budgets)
Revenue budgets are an anticipation of what the government aims to raise during one year. Expenditure budgets are an estimate of the costs to be executed during the same period.
General Structure: Revenue Quotes
Revenue is structured by organizational units and economic categories.
Organizational Structure
This structure classifies revenue based on the management center responsible for collecting it. It distinguishes between the state, autonomous agencies, social security, state agencies for improving public services, and other public sector entities.
Economic Classification
This classification orders income according to its nature, separating current income, capital income, and revenue from financial operations. The budget is divided into nine chapters:
- Chapters 1-5: Current revenue estimates
- Chapters 6-7: Capital inflows
- Chapters 8-9: Financial operations
Chapter 1: Direct Taxes and Social Contributions
This chapter includes the estimate of revenues from direct taxes, such as income tax and corporate tax.
Chapter 2: Indirect Taxes
This chapter provides for the unpredictability of income from the collection of indirect taxes, such as Value Added Tax (VAT) and excise duty on tobacco.
Chapter 3: Fees, Public Prices, and Other Income
This chapter includes revenues from services provided by the state and paid through taxes or public fees.
Chapter 4: Current Transfers
This chapter foresees revenue from money received without consideration to finance current operations.
Chapter 5: Patrimonial Revenues
This chapter includes revenues expected from the income of the property or assets of the state, such as interest on deposits.
Chapter 6: Sale of Real Investments
This chapter includes expected revenue from the sale of capital assets and property of the state.
Chapter 7: Capital Transfers
Similar to Chapter 4, but for financing capital operations.
Chapter 8: Financial Assets
This chapter includes resources from the sale of financial assets and those arising from the repayment of loans, deposits, and finances.
Chapter 9: Financial Liabilities
This chapter foresees income earned by the state, autonomous bodies, and public organizations from the issuance of debt and obtaining loans, deposits, and finances.