√ Definition of Fiscal Policy, Objectives, Functions, Types & Examples
Definition of Fiscal Policy, Objectives, Functions, Types & Examples - On this occasion Regarding Knowledge will discuss Fiscal Policy. This discussion explains the meaning of fiscal policy, objectives, functions, types and examples of policies briefly and clearly. For more details, please see the following review.
Definition of Fiscal Policy, Objectives, Functions, Types & Examples
Fiscal Policy is different from Monetary Policy, even though the aim is the same, namely to improve economic conditions. Fiscal policy is a policy to regulate the economy by managing state income and expenditure through setting tax levels and state spending. Meanwhile, monetary policy is a policy to regulate the economy by regulating the amount of money in circulation and interest rates.
Understanding Fiscal Policy
What is meant by Fiscal policy? The definition of Fiscal Policy is an economic policy carried out by the government to direct and manage the country's economic conditions to be better or more productive than previously. The main instruments of fiscal policy are tax revenues and state expenditure.
This policy is carried out by changing the pattern of revenue (in the form of taxes) and state expenditure carried out by the government. In its implementation, this policy is carried out by regulating the State Expenditure Budget (APBN) and changing the figures in it to obtain the existing conditions for the purpose of preparing the APBN.
Understanding Fiscal Policy According to Experts
To help our understanding of the meaning of fiscal policy, we can refer to the opinions of the following experts:
Nature (2007:57)
Fiscal policy is a policy that adjusts government spending and revenues to improve economic conditions.
Ahman (2007: 126)
Fiscal policy is an economic policy that the government uses to control or direct the economy in a better direction.
Adiwidya Vision Team (2015:92)
Fiscal policy is a policy made by a government to direct the country's economy through state revenues (taxes) and expenditure.
Haryadi (2014: 82)
Fiscal policy is an economic policy used by the government to direct a country's economy a better direction or in accordance with what is desired by changing revenues and expenditures government.
Zain (2008:12)
The main instruments of fiscal policy are government spending and taxes, where taxes are levies made by the state, both central and regional governments, which are regulated by law. For general financing from the government in order to carry out government functions and does not contain an element of individual compensation by the government for tax payments.
Fiscal Policy Objectives
As previously mentioned, the main objective of fiscal policy is to determine the direction, targets and priorities of national economic development. In detail, the following are some of the policy objectives:
- To achieve national economic stability
- To accelerate the rate of national economic growth
- To accelerate the rate of investment in Indonesia
- To open up wider job opportunities
- To realize national justice
- To maintain the stability of prices of goods and services so that the rate of inflation can be controlled
- For equal distribution and distribution of income
Fiscal Policy Function
Fiscal policy has several functions that complement each other. The following are the functions of fiscal policy:
Optimizing Resource Usage
The resources referred to here are natural resources and human resources. Without these two components, a country's economic activity will be threatened. With the existence of a fiscal policy, these two resources will be balanced and their use will be more optimal.
Optimizing Investment Activities
Investment is one source of income for the country's foreign exchange. Of course, this will provide benefits for the government and the state because it is mutually beneficial for entrepreneurs and investors.
With this policy, capital owners get a great opportunity to invest their capital.
Fiscal Policy Instruments
In fiscal policy there are two main instruments, namely expenditure (state spending) and income (from taxes). Here's a brief explanation:
State Revenue (Tax)
Tax is a fiscal instrument used by the government to finance development. This tax is coercive and is stated in the constitution, where all taxpayers (individuals and business entities) are obliged to contribute to the state.
State Expenditures
All state expenditure is prepared in the State Expenditure Budget (APBN). There are many types of government spending, starting from costs for development infrastructure, development costs for the general public, and costs for operational needs own government.
Types of Fiscal Policy
There are several types of fiscal policy that can be adopted by a government to overcome economic problems. The various types of fiscal policy are as follows:
Based on Total Revenue and Expenditures
Based on the amount of revenue and expenditure, the following is included in fiscal policy:
- Surplus Budget Policy
A surplus budget policy is a government policy not to use all income for expenses or spending. That way the government can save or increase savings and can reduce inflation.
- Balanced Fiscal Policy
Balanced fiscal policy is a government policy that makes the amount of revenue and expenditure balanced or equal. The advantage of this policy is that the country does not need to borrow funds from foreign countries. Meanwhile, the drawback of this policy is that the national economic condition becomes unfavorable or even declines.
- Dynamic Fiscal Policy
Dynamic fiscal policy is a policy that is similar to balanced policy, but there is improvisation in it The meaning is that the amount of expenditure and income is the same but both can increase as time goes on time.
This policy was implemented to accommodate the government's increasing needs over time.
- Deficit Fiscal Policy
A deficit diskal policy is a policy that is opposite to a surplus policy. In other words, the amount of income is lower than the amount of expenses.
This policy was implemented when there was sluggishness and depression in national economic growth. However, this policy has a drawback, namely that the state budget is always in a state of shortage.
Based on Theory
Based on theory, the following are the types of fiscal policy:
- Functional Fiscal Policy
Functional fiscal policy is carried out to consider budget expenditures and additional employment opportunities carried out by the government as an indirect result of national income.
- Deliberate Fiscal Policy
Fiscal policy deliberately aims to overcome various economic problems nationally. The way this is done is by deliberately manipulating the budget, either through changes in taxes or changes in state spending.
There are 3 forms of this policy, namely:
- Changing government spending
- Changing the tax collection system
- Change government management and tax collection systems simultaneously
- Accidental Fiscal Policy
This policy aims to control the business cycle so that it is not too volatile. When the economy experiences depression, this policy will increase economic activity. Meanwhile, during inflation, this policy will reduce the inflation rate.
This type of unintentional policy includes proportional tax, progressive tax, unemployment insurance, minimum price policy.
Example of Fiscal Policy
There are many examples of fiscal policies that have been carried out by the Indonesian government. The following are some examples of implementing this policy:
- The government decided to increase taxes to increase state income.
- The government issues bonds to borrow money from foreign countries.
- The government requires people to have a Taxpayer Identification Number (NPWP) to increase their number of taxpayers.
- Manage the budget by reducing state spending and/or increasing taxes so that the economy becomes more stable.
That is a brief explanation regarding Definition of Fiscal Policy, Objectives, Functions, Types & Examples. Hopefully this article can be useful and broaden our insight.
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