A system of budget classification enables the myriad government operations and transactions to be organized into relatively homogeneous categories that facilitate the analysis of the impact, nature, and composition of revenues, expenditures, and other financing activities of government.
On the revenue, taxes are classified by the type of activity on which the tax is levied (income, sales, property and so on). Other current non-tax revenues are classified by the nature of the inflow, such as income from government property, sales proceeds, fines, and donations. Capital revenues are classified by the type of asset sold.
Grants are distinguished by whether they come from domestic or foreign governments and international institutions and whether they are for current or capital purposes.
On the expenditure, outlays are frequently classified by the responsible institution or organization. The two most useful types of classifications of government expenditures are the functional classification and the economic classification.
In functional classification, expenditures (and lending) are classified according to the main purpose or function, such as defense, education, and health. The three-level Classification of the Functions of Government published by the Statistical Office of the United Nations is commonly accepted. The value of functional classifications is that they permit analysis of trends in government expenditures even when the organizational structure of government changes.
The economic classification groups expenditures into current and capital and by whether they are requited or unrequited; if requited, for what kind of goods and services, and if unrequited, by the type of person or institution receiving the payment. The objective is to show the kinds of transactions through which the government performs its functions and their impact on markets, financial conditions, and the distribution of income. These transaction categories are wages and salaries, purchases of goods and services, interest on the debt, subsidies to enterprises, transfers to households and other governments, and lending.
One of the most useful ways to analyze government outlays is by means of a cross-classification by economic character and function. This classification reveals the means by which government performs its functions and the impact these activities will have on the rest of the economy.
From: Fiscal Management in Russia. World Bank, 1996.
Words you may need:
functional classificationфункциональная классификация
economic classificationэкономическая классификация
requitedadj возвратный
cross-classificationперекрестная классификация
Ex. 13. Read the dialogues, sum up their content and act them out: