Macroeconomics

Sources of Income and Expenditure in the UK

The main source of revenue for the government in the UK economy is a tax. It is worth understanding that the government levies diverse types of taxes to raise adequate revenue for effective operations. Income tax is the largest source of revenue that is collected by the government. According to Treanor (2013), the lower rate of income tax is taxed at 10% and the highest rate – at 40% depending on the income category of taxpayers. National Insurance Contributions form the second largest source of revenue for the UK government. This is defined as an additional levy income tax estimated at around 21.5%. Value Added Tax (VAT) is the third-largest source of revenue. Notably, VAT is charged at the rate of 20% on the overall supply of goods and services in the economy. Other sources of revenue include excise duties charged on motor fuel, alcohol, tobacco, and vehicles. The government also collects revenues from stamp duty and corporate tax charged at the rate of 30%. Therefore, it can be firmly concluded that taxation is the primary source of revenue for the UK government with income tax forming the largest part.

Public expenditure in the UK is the responsibility of the government. Therefore, the government dedicates the collected revenues to different areas of expenditure through its budget. The most significant areas of expenditure include social protection, which gets the largest share of around 28%. Treanor (2013) opines that the government also dedicates around 18% of its expenditure on health and 13% to education. Other crucial areas of expenditure include defense, public order and safety, debt interest, housing and environment, personal social services, public transport, and other areas that are envisaged to boost the living conditions of all citizens in the UK. The diverse areas of expenditure play an instrumental role in ensuring that people live according to the expectations of the government of the day.

Sources of Revenue for the Dubai Emirate

Dubai is the chosen UAE emirate to be discussed in this part. It is worth noting that the emirate of Dubai is located on the southeast coast of the Persian Gulf, and it has the largest population of the UAE being estimated at about 2,106,177 people. It is the second-largest emirate after Abu Dhabi.

Unlike many other states around the globe, Dubai does not rely on taxation as the main source of revenue for economic growth. Tourism is one of the largest sources of revenue for Dubai. The emergence of tourism as one of the largest sources of finance in Dubai is boosted by the construction of many hotels for tourists. Revenue in the Dubai economy is also derived from trading activities. Traders are attracted to Dubai by the zero levels of taxation on their investments hence generating adequate revenues for the operation of the emirate. The economy of Dubai grows in line with crucial trading activities that take place and the large investments that are dedicated to trading. The zero corporation tax in Dubai attracts more business people hence enlarging this source of revenue. It is worth acknowledging that Dubai derives its incomes from real estate and property. Dubai is described as the home of skyscrapers and diverse properties that generate revenue for economic growth. Therefore, the government has set up industry-specific free zones in Dubai to boost the quality of property in the emirate. For instance, Dubai earns revenues from the Dubai Internet City that works in line with Dubai Media City. According to Wam (2011), the fees charged on property transfer are estimated at 4% hence generating the required level of revenue for the operation of Dubai as an emirate. Dubai is different from other emirates because it earns only 3% of its revenue from oil and natural gas. This is attributed to the fact that it has lesser oil resources compared to other emirates such as Abu Dhabi. Overall, it can be noted that Dubai has diversified its revenue resources earning a large sum of its total revenues from non-oil sources. Non-oil sources account for about 97% of the total revenue sources while oil and natural gas account for only 3% of the total revenue collected for economic growth. This has boosted the economic growth of Dubai as the second largest emirate of the UAE.

Patterns of Expenditure in Recent Years

Expenditure in 2012

The budget of the Dubai emirate had an estimated gap of Dh1.827 billion between revenues and expenditures. The Department of Finance estimated revenues at Dh30.431 billion and expenditures at Dh32.258 billion in line with the international standards on budget preparation. The expenditure pattern for the fiscal year 2012 was effectively distributed to ensure that it caters to the different sectors of the economy. Wam (2011) affirms that the 2012 budget for the Dubai emirate dedicated 41% of the overall expenditure to the development of transportation, infrastructure, and other development sectors. This was in line with the objective of boosting trading activities that contribute to a large part of the revenues of the emirate. More so, this expenditure included significant areas of the economy like roads, civil aviation, transport, and tourism that make up some of the largest sources of revenue for the emirate. Additionally, Wam (2011) points out that the social development sector was allocated 29% of the overall expenditure in line with the budget. The social development sector is made up of significant areas including education, housing, culture, and healthcare. This was aimed at ensuring that its residents lead a quality life in all their social areas. It is also worth noting that 7% was allocated to public services and the government excellence sector. This entails key areas including the Department of Finance, the Land Department, and the Financial Audit Department. According to Wam (2011), the budget also allocated 22% of the overall expenditure to matters of safety, security, and justice. The different expenditures were dedicated to specific areas to ensure that maximum benefit is derived from the budget. The budget for the 2012 fiscal year was focused on spending heavily on the key areas of the economy that play an instrumental role in attracting tourists and traders who contribute large sums of the overall revenue in the emirate.

Expenditure in 2008

The UAEinteract (2008) indicates that the budget of the Dubai emirate in the fiscal year 2008 was estimated to have a surplus of Dh11.4 billion. The budget was set at Dh26.5 hence ensuring that expenditure was effectively distributed according to the strategic plan of the Dubai emirate. According to UAEinteract (2008), salaries and wages were allocated 28% of the expenditure hence forming part of the recurrent expenditure. Salaries and wages cover all employees working in the various sectors of the economy in the Dubai emirate. More so, 32% of the expenditure was were dedicated to administrative and general expenditure. This indicates that the level of expenditure is focused on boosting social services such as education, health, and other social amenities in the Dubai emirate. The dedication of such expenditure to these areas is instrumental in ensuring that sound development is realized by the government on the overall scale. Another significant area of expenditure in 2008 was the area of development and projects. The UAEinteract (2008) highlights that development and projects received a dedication of 40% of the expenditure hence ensuring continuous investments in the emirate. Accordingly, the budget highlighted the view that developmental and project expenditure would be focused on areas of infrastructure and trade development to ensure that more investors are attracted to Dubai. This indicates a similar focus on economic expansion through trade and tourism in the Dubai emirate hence ensuring continuous stability in this business hub.

Expenditure in 2003

According to the UAEinteract (2013), the budget for the fiscal year 2003 in the Dubai emirate entailed an estimated deficit of around Dh 8.12 billion. This year was aimed at slashing down some of the heavy expenditures that had been incurred in the fiscal year 2002. The budget cut down on the expenditure on salaries and wages by dedicating 24% to this respect. It is worth noting that this represents the recurrent expenditure that was incurred by the emirate. This was to encourage effective performance by respective individuals offering services in the respective government sectors in Dubai. Additionally, 34% of the overall expenditure was dedicated to administrative and general expenditure. This came in light of the continuous emphasis on the prioritization of education, health, and other social services in the populous emirate. This was in line with ensuring that all these social sectors get the best form of development hence leading to the subsequent growth of the Dubai emirate with respect to social services. The UAE interact (2013) indicates that the government dedicated 42% of the budget to developments and projects to boost the economy of Dubai. In line with developments and projects, Dubai was envisaged to have more skyscrapers and real estate in addition to its infrastructure hence ensuring continuous generation of revenues to enhance its growth. Thus, the main concern of the government was to ensure that the economy expands for the continuous prosperity of the emirate. All the budgets above indicate the desire of the Dubai emirate to expand its economy and remain attractive to tourists and business people.