The tables below show the expected revenues and projected expenditures from the budget of a hypothetical country in 1998. Use the information in the tables to answer the questions that follow. EXPECTED REVENUE
ITEM
AMOUNT ($ millions)
Rents, royalties and profits
75.00
Company income tax
150.00
Customs and excise duties
300.20
Personal income tax
80.00
Fees specific charges
60.80
Value added tax
100.00
PROJECTED EXPENDITURE
ITEM
AMOUNT ($ millions)
General administration
220.10
Maintenance of foreign missions
50.00
Transfer payments
65.00
Building of schools and hospitals
200.00
Road construction
180.90
(a) Calculate the total revenue from (i) direct taxes [3 marks] (ii) indirect taxes [3 marks] (iii) non-tax sources [3 marks] (b) Determine the total (i) capital expenditure [3 marks] (ii) recurrent expenditure [3 marks] (c) Determine whether the budget is a surplus or deficit. [5 marks]
Explanation
(a)(i) Direct taxes: Company income tax 150.00 Personal income tax \(\frac{ 80.00}{230.00}\) (ii) Indirect taxes: Customs & Excise duties 300.20 Value Added Tax \(\frac{ 100.00}{400.20}\) (iii) Revenue from non-tax sources: Rent, Royalties and Profits 75.00 Fees and specific charges \(\frac{ 60.80}{135.80}\) (b)(i) Capital expenditure: Building of schools and hospitals 200.00 Road construction \(\frac{ 180.90}{380.90}\) (ii) Recurrent expenditure: General administration 220.10 Maintenance of foreign missions 50.00 Transfer payments \(\frac{ 65.00}{335.10}\) (c) Total revenue $766.00 million Total expenditure $716.00 million Surplus $766 - $716 = $50 million The budget is a surplus because total revenue exceeds the total expenditure.
