CE Public Finance1 Public Finance HKSAR

CE Public Finance2 Public Finance What is public finance? Public finance means how the government raises funds and spends the money on various kinds of services for the economy.

CE Public Finance3 So public finance is concerned with The revenue and expenditure of the government

CE Public Finance4 The government is referred to as the public sector

CE Public Finance5 The size of the public sector is measured by the amount of public expenditure ( 100% ) GDP

CE Public Finance6 Public expenditure as % of GDP of the HKSAR

CE Public Finance7 Sources of government revenue tax non-tax

CE Public Finance8 Classification of taxes

CE Public Finance9 According to how the tax payment changes with income, taxes can be classified into: __________, ____________ and __________ taxes Classification of taxes direct indirect progressive proportional regressive According to the party who bears the tax burden, taxes can be classified into: ________ taxes and ________ taxes

CE Public Finance10 Tax revenue ( 1 ) Direct taxIndirect tax

CE Public Finance11 Direct tax is a tax on income or wealth. the tax incidence or burden CANNOT be shifted. the tax rate is either progressive or proportional Examples in Hong Kong salaries tax profit tax property tax estate duty interest tax ? dividend tax?

CE Public Finance12 Indirect tax is a tax on goods and services the tax incidence or burden CAN be shifted ( usually to the consumers, depending on the elasticity of demand and supply ) the tax rate is regressive Examples in H.K. cigarettes tax; stamp duty; general rates; vehicle import tax; airport departure tax; tax on alcoholic liquor; hotel accommodation tax; entertainment tax; betting tax and etc.

CE Public Finance13 Quiz 1       Classify the above Hong Kong taxes into direct and indirect taxes.

CE Public Finance14 Tax Revenue ( 2 ) Progressive tax; Proportional tax; and Regressive tax

CE Public Finance15 rogressive tax: Tax payment takes ____________________ of taxable income as income increases. roportional tax: Tax payment takes ____________________ of taxable income as income increases. egressive tax: Tax payment takes ____________________ of taxable income as income increases. Progressive, proportional and regressive taxes an increasing percentage the same percentage a decreasing percentage

CE Public Finance16 Progressive, proportional and regressive taxes Fill in the blanks of average tax rate ! A, B and C are three types of tax: 10%7.5% 6.7% 7.5% 8%

CE Public Finance17 Progressive, proportional and regressive taxes Which type of tax is a progressive tax? A, B and C are three types of tax: 10%7.5% 6.7% 7.5% 8%

CE Public Finance18 Progressive, proportional and regressive taxes Which type of tax is a regressive tax? A, B and C are three types of tax: 10%7.5% 6.7% 7.5% 8%

CE Public Finance19 Progressive, proportional and regressive taxes A, B and C are three types of tax: 10%7.5% 6.7% 7.5% 8% Which type of tax is a proportional tax?

CE Public Finance20 Quiz 2 Suppose the government levies a tax of $10 on all passengers who depart HK by sea. What type of tax ( progressive / proportional / regressive ) is it? It is a _________ tax. Since all passengers pay the same amount of tax, tax payment takes a _______ proportion of income for the higher income group. regressive smaller

CE Public Finance21 Quiz 3 When the tax payment increases as the income increases, is it a progressive tax ? ____. No A tax is progressive if the tax payments takes an increasing percentage of taxable income as income increases.

CE Public Finance22 Quiz 3 When the tax payment increases as the income increases, is it a progressive tax ? e.g. 10% 8% Fill in the average tax rates !

CE Public Finance23 Quiz 3 When the tax payment increases as the income increases, is it a progressive tax ? e.g. The tax payment increases as the income increases, but it is a _________ tax. regressive 10% 8%

CE Public Finance24 Non-tax revenue Examples: sale of land; fines and penalty; government fees and etc.