Purpose of Public Finance

Public finance refers to activities carried out by the government associated with the raising finance and spending the finances so raised

Public finance is related to the financing of state activities and a narrow definition of public finance would try to say that public finance is a subject which discusses the financial operation of the fiscal or of the public treasury.

Purpose of public finance

To Provide Essential Goods and Services

The government provides essential goods and services of public interest such as public schools, public hospitals, security and roads. such facilities cannot be adequately conveniently provided by the private sector due to the high cost and risks involved hence the government provides public finance

To Encourage the Consumption of Certain commodities

The government may intend to encourage the production or consumption of certain commodities such as maize flour and fertilizer hence providing subsidies to enable producers to pass on the benefit to the final consumer

To Balance Regional Development

The government tries to promote regional development by starting up projects in areas lying behind, equally the government may give incentives such as low taxes, subsidies and tax holidays to business people in certain areas hence encouraging their growth and development

To create a conducive business environment

Through public expenditure, the government develop infrastructure such as transport system and  

Security so as to create a conducive environment for business to develop in

To raise revenue for the government

One of the main purposes of public finance is to raise revenue for the government to be used in providing essential goods and services of public interest

To redistribute wealth

The government generates wealth by heavily taxing the rich and using the money so raised to provide goods and services that benefit the poor

To encourage consumption of certain products

The government may seek to discourage consumption of certain goods such as cigarettes, and alcohol so as to reduce their effects on consumers’ health. to attain this the government may charge higher heavier taxes on such products which in turn would raise their prices.

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