On an ordinary level, people often use the word "finance" incorrectly, calling it just a certain amount of money. Hence, confusion with the concept of "public finance" can arise. What does it actually mean?
Scientific definition
Textbooks and encyclopedias provide different definitions of the term "public finance". Perhaps one of the shortest is quoted by Wikipedia: "Public finance is a form of organization of monetary relations, in which the state is a participant in one form or another."
The popular Internet resource also quotes the "Great Soviet Encyclopedia". Here, public finances are defined as a set of economic relations, a system of education and distribution of funds necessary for the state to maintain its bodies and perform its inherent functions.
Other formulations can be found in the scientific literature. But in simple terms, we can say the following. Public finance is how the government receives, distributes and spends money.
It is important to understand that public finance is not a fund of money. Also, this concept should not be confused with the state budget. The latter is only one of the constituent parts of the public finance system.
What does government finance include
In different countries, public finances have their own structure and may include different monetary funds and institutions. The state finances of Russia include:
- Federal budget. It is a documented plan by which government money is generated and spent;
- Extrabudgetary funds. The most important of them are the Pension Fund of Russia, the Social Insurance Fund (FSS) and the Mandatory Medical Insurance Fund (MHIF);
- The budgets of the constituent entities of the Russian Federation: republics, territories, regions and cities of federal significance;
- off-budget funds of the constituent entities of the Russian Federation.
They talk about two levels of public finances in Russia. The first is the finances of the federal authorities, the second refers to the subjects of the federation. The municipal level is usually not included here.
In addition, the scope of public finance includes:
- tax system - collection of taxes and fees from the population and enterprises;
- non-tax revenues to the state budget. These are, for example, income from the use of state property or its sale;
- public credit is an instrument through which a country borrows money from abroad or from its own citizens and organizations.
The state does not include corporate finance (how a company or organization manages money) and personal finance (related to household activities).
Control
State finances are managed by:
- head of state. In Russia, this is the president of the country;
- legislative bodies - first of all, the parliament (Federal Assembly). He passes laws in the field of public finance;
- executive agencies. These are, first of all, the government of the country, the Bank of Russia, the Ministry of Finance.
Functions
Public finance has several functions. As such, they are usually distinguished:
- Redistributive function. The state collects money from all available sources into a single fund and directs it to various areas. In this case, income from some sectors of the economy can be directed to support others, funds from "rich" regions - to the poor, etc. For example, part of the oil and gas money goes to finance culture or medicine, to pay salaries to state employees.
- Regulatory. By lowering and increasing taxes, their cancellation and installation, the government can influence the economic or consumer activity in the country, support priority sectors. And with the distribution of funds, the most important areas and directions from the point of view of the authorities, receive more.
- Control. Collecting and distributing money, the state monitors the processes in the economy and controls them.
Sometimes they also distinguish such functions as stimulating, reproductive, stimulating, planned and social.
