Public Finance development
The traditional concept of public finance
• Public financial management is defined according to this concept as: “The science that studies the means that the state obtains from public revenues to cover public expenditures, and the distribution of the resulting burden on individuals.”
• This narrow concept of public finance is linked to the functions of the state and to the prevailing political philosophy in that era when the functions of the state were specific and limited to external defense, internal security and the administration of justice to be known as the guard state.
The genesis of public finance in antiquity
• During the early Judaism era, its teachings included some systems and rules related to interest, wages, taxes, and inheritance, in addition to regulating the rest of the economic affairs related to public finance...
• In the era of the Greeks, Plato and Aristotle's writings included some general economic ideas and financial issues, which had a major role in the development of financial thought in the modern era.
• In the era of the Roman Empire, the development of financial thought was mainly linked to the dominance of individualism, which was based on it in the past, after the idea of natural law that contributed to the emergence of capitalism.
• In the Middle Ages, the church played a major role in economic and social life, so the state almost disappeared and with it, the financial system that was known before, and the state's financial thought shrank.
The emergence of public finance in the Islamic era
• The Arabs did not have a financial system before Islam, so there is no effect of regulating public finances, as the House of Money for Muslims, which was set up by Caliph Omar Ibn Al-Khattab, was similar to the public finance treasury in the modern era.
• - As the Islamic legislation envisaged in imposing taxes the principles of justice, certainty, propriety, and economy, which are the same principles that the world did not reach until after twelve centuries...
• All this has appeared in many of the writings of Islamic jurisprudence of Ibn Malik in the book “Zakat” and Ibn Yusuf Al-Ansari in his famous book “Al-Kharaj” and Ibn Rajab Al-Hanbali “Extraction for the provisions of the tax” and Ibn Khaldun in his famous introduction…
Characteristics of traditional public finance
Since the functions of the state are limited in achieving internal and external security, defense, justice, and some public works, its expenditures are limited and confined to these functions, and its revenues do not exceed these basic expenditures.
1- Revenue and expenditure are limited
Since the functions of the state are limited in achieving internal and external security (defense), justice, and some public works, its expenditures are limited and confined to these functions, and its revenues do not exceed these basic expenditures.
2- The neutral role of finance
Public finance, under the traditional concept, has a neutral role and only intervenes to cover the necessary expenditures necessary for the traditional functions of the state. Therefore it has no economic, social, or political dimensions...
3- No need for loans
The public revenues needed to cover state expenditures were limited to some income taxes but not others
Other revenues such as loans, fees, and indirect taxes such as consumption taxes...
4- Limiting the arithmetic balance
The state budget, under the traditional concept of public finance, is characterized by the small size of public expenditures and public revenues, and its role is limited to arithmetic or numerical balance, which stems from the nature of traditional state functions...
The genesis of modern public finance
The traditional economists from the supporters of the free sect and the naturalists before them directed a good part of their interest in the study of public finance, as they believed in the principle of the neutrality of fiscal sovereignty and thus limiting the role of the state in the economic and social aspect to the least possible limits. Public expenditures were generally limited to ensuring a balance between revenues and expenditures
The ideas of the traditional economists gradually faded away after the 1929 crisis proved that economic equilibrium was not achieved automatically, as it clearly shows the role that fiscal policy can play in bringing about equilibrium. Fiscal policy in achieving economic stability.
The evolution of the role of public finance
The Public Finance Department is concerned with government spending and how revenues are collected. It is drawn from economics, general political science, accounting, and auditing.
Public finances expanded its focus from the budget to mobilizing resources, disbursing expenditures, and covering the debt. Thus, public financial management expanded from the previous government budget to all levels of government and the broader public sector, including public institutions and agencies, and public-private partnerships.
The importance of public finance
Financial conditions have an important impact on the political situation of the state, as many countries lost their political independence and were exposed to revolutions and unrest due to the turmoil and instability of their public finances.
As happened with the American Revolution that erupted due to England imposing taxes on America, during the English occupation of it, or the English Civil War that erupted due to the King imposing a tax on ships and a civil war erupted... The state budget is also considered a political act, because the government translates its policy Through the appropriations included in the general budget, to win the support of citizens.
The modern concept of public finance
The science that examines how to use financial tools, including public expenditures and public revenues, in order to achieve the goals and directions of the state stemming from its political, economic, and social philosophy...
Characteristics of public finance under the modern concept
Achieving economic and social balance: Public finance aims to achieve economic and social balance and is no longer limited to achieving financial balance. Therefore, the general budget was called the economic budget, as it aims to achieve economic and social stability, as its goal is to limit and eliminate economic and social problems.