ABSTRACT

This chapter covers diversity of budget structures, theories of taxation: excessive taxation a way to economic decline, taxation from a Sharia perspective: restraint and equity, expenditure policy: reduce unproductive spending, fiscal balance: a requisite for sound public finance and Government debt: an index of waste. Governments vary widely in their power to appropriate part of the gross domestic product (GDP). The share of government revenues may be as low as 12.9 percent and as high as 53.5 percent. The share of taxes could be as low as 8 percent of GDP. The government may also carry out taxation by money printing. Although, money printing finances government spending in the same way as money obtained through taxation, it is politically more attractive, since no taxpayer is directly subject to taxation. Income taxation should be regulated by Sharia laws. Government debt may be an index of government waste; it shows how rigid a government may be in respect to its finance.