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Introduction

This module aims to introduce you to the theory and practice of public finance, with special reference to how governments raise and use revenues. It is concerned with taxation, borrowing and aid. There are economic principles that bear on the issues of financing public expenditure and these are covered in the module. At the same time, however, we recognise that decisions on taxation, borrowing and aid are not taken solely with reference to economics but also to politics, and the module raises relevant political and social issues too. While the module has some emphasis on taxation in poorer countries, they are not its exclusive concern.

Learning outcomes

When you have completed your study of this course you will be able to:

  • outline and discuss the main sources of government revenue
  • explain the main criteria for assessing types of taxation
  • analyse the main trends in taxation especially as between advanced and developing countries
  • evaluate the main recommendations and analytical methods of the theory of optimal taxation that underpins modern tax reform
  • gauge the degree of inequality and evaluate policies to reduce inequality
  • outline the economic arguments for and against environmental taxes
  • assess the impact of taxes on people’s consumption behaviours
  • evaluate the causes of weak tax administration in developing countries and recommended appropriate policies to improve tax administration
  • judge the use of Value Added Taxes in the context of developing countries
  • discuss the causes and effects of tax competition between countries
  • evaluate the effects of natural resource abundance on countries
  • explain the economic case for fiscal decentralisation
  • explain the characteristics of local taxes and some of the problems of tax collection at local level
  • define the issues in how fiscal policy can be used to stabilise economies
  • outline the different effects and policy implications of internal and external debt
  • explain how governments can create the illusion of fiscal adjustment by financial engineering
  • assess the success of aid giving as a method of supplementing government revenues in poorer countries and analyse its effects on government spending, tax raising and borrowing.

Study materials

Study guide

You will receive a looseleaf binder containing eight units. The units are carefully structured to provide the main teaching, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. The unit files are also available to download from the Virtual Learning Environment.

Readings

You will receive four volumes of Readings, which are a compilation of recently published articles or seminal writings which augment and illustrate the main text. These readings are drawn from a wide variety of sources including:

  • "classics" in the study of public finance
  • operational and policy documents that illustrate how the public finance practitioner uses the tools of public finance in real world policy contexts
  • case studies and research papers that examine the impact of various public finance policies and initiatives in a variety of country and policy contexts.
Virtual learning environment

You will have access to the VLE, which is a web-accessed learning environment. Via the VLE, you can communicate with your assigned academic tutor, administrators and other students on the module using discussion forums. The VLE also provides access to the module Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.

Audio

Taxation

In this interview, Tony Allen discusses with Norman Flynn the trends in sources of taxation, optimal taxation, the use of taxation as a policy tool, local taxation and foreign aid.

Download audio

Module overview

Unit 1 Introduction to Taxation
  • 1.1 Introduction
  • 1.2 Criteria for Assessing Types of Taxes
  • 1.3 Types of Tax
  • 1.4 Trends in Taxation
  • 1.5 Tax Policy and Tax Administration
  • 1.6 Conclusion
Unit 2 The Economic Theory of Taxation
  • 2.1 Introduction
  • 2.2 Economic Efficiency
  • 2.3 Income Tax versus Sales Tax
  • 2.4 Taxes on the Supply of Labour
  • 2.5 Equity and Efficiency
  • 2.6 Optimal Taxation
  • 2.7 Implications for Tax Policy
  • 2.8 Summary and Conclusions
Unit 3 Public Policy and Taxation
  • 3.1 Introduction
  • 3.2 Inequality
  • 3.3 Environmental Taxes
  • 3.4 Behaviour and Taxes: Tobacco and Alcohol (Sin) Taxes
  • 3.5 Summary and Conclusions
Unit 4 Tax Policy Issues in Developing Countries
  • 4.1 Introduction
  • 4.2 Tax Policies in Developing Countries
  • 4.3 Tax Administration in Developing Countries
  • 4.4 Value Added Tax (VAT)
  • 4.5 Summary and Conclusions
Unit 5 Tax Policy Issues
  • 5.1 Introduction
  • 5.2 Tax Competition
  • 5.3 The Internationalisation of Tax Policy – Base Erosion and Profit Shifting (BEPS)
  • 5.4 Natural Resources ‘Curse’?
  • 5.5 Flat Taxes
  • 5.6 Summary and Conclusions
Unit 6 Sub National government Revenues
  • 6.1 Introduction
  • 6.2 The Economic Case for Fiscal Decentralisation
  • 6.3 SNG Tax Revenues
  • 6.4 Intergovernmental Grants and Transfers
  • 6.5 Sub-National Government Borrowing
  • 6.6 The Impact of Fiscal Decentralisation
  • 6.7 Summary and Conclusions
Unit 7 Budget Deficits and National Debts
  • 7.1 Introduction
  • 7.2 Deficit Definitions
  • 7.3 Why do Governments Run Deficits?
  • 7.4 Why Do Deficits Matter?
  • 7.5 Does Government Debt Matter?
  • 7.6 Austerity Policies
  • 7.7 Fiscal Policy in Developing Countries
  • 7.8 Fiscal Adjustment and Fiscal Illusions
  • 7.9 Summary and Review
Unit 8 Foreign Aid and Debt Relief
  • 8.1 Introduction
  • 8.2 What is Foreign Aid? (ODA)
  • 8.3 Donors of Foreign Aid
  • 8.4 Allocation of Foreign Aid
  • 8.5 Budget Support
  • 8.6 Aid and Tax Effort in Recipient Countries
  • 8.7 Aid Volatility
  • 8.8 Debt Relief
  • 8.9 Summary and Conclusions

Tuition and assessment

Students are individually assigned an academic tutor for the duration of the module, with whom you can discuss academic queries at regular intervals during the study session.

You are required to complete two Assignments for this module, which will be marked by your tutor. Assignments are each worth 15% of your total mark. You will be expected to submit your first assignment by the Tuesday of Week 6, and the second assignment at the end of the module, on the Tuesday after Week 10. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Virtual Learning Environment.

You will also sit a three-hour examination on a specified date in September/October, worth 70% of your total mark. An up-to-date timetable of examinations is published on the website in April each year.

Module sample

Click on the link below to download the module sample document in PDF.