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Question 2. (25 marks) A sustainable economic and fiscal (taxation) framework is a key part of...

Question 2. A sustainable economic and fiscal (taxation) framework is a key part of the engineering procurement process. Propose, and justify, key sustainability criteria for inclusion in any fiscal (taxation) framework relating to the procurement of engineering products or information technology services.

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According to the question. Let us first know what is Sustainable procurement. It is nothing but the purchasing and investment process that takes into account the economic, environmental and social impacts of. the entity's spending. Sustainable procurement allows organizations. to meet their needs for goods, services, construction works and utilities.

Potential benefits of sustainable procurement include: long-term efficiency savings. more efficient and effective use of natural resources. reducing the harmful impact of pollution and waste.

Fiscal sustainability is more than projecting the future; it is about the urgency of policy changes as well as the need for new budget tools to assess governments’ fiscal position because conventional instruments are not up to the task. A medium-term expenditure framework (MTEF) and fiscal rules, two of the most prominent contemporary innovations, extend the timeframe of budgeting 3-5 years ahead, but they are not attuned to long-term issues. An MTEF does not look far enough ahead and, coupled with hard constraints, may spur some stressed governments to engage in budgetary legerdemain which improves the medium-term outlook at the expense of the country’s long-term fiscal health.

The shift to a long-term horizon has expanded the ways governments and international organisations think about sustainability. The term has

retained its original meaning as a measure of the solvency of government, but it has acquired several dimensions that pertain to governments that have no difficulty meeting current obligations. Contemporary sustainability analysis focuses on fiscal conditions that may retard economic growth, cause tax burdens to rise, or transfer significant costs to future taxpayers. The added dimensions reflect concern that governments have accumulated long-term liabilities that do not appear in current budgets or balance sheets but may disadvantage future generations when they come due. The expanded concept of sustainability is grounded on the norm that responsible governments should not do harm that will appear decades after the relevant policies were adopted.

Four dimensions of sustainability may be delineated. Although they are separated here for analysis, in practice they tend to appear in tandem:

  • Solvency – the ability of government to pay its financial obligations.

  • Growth – fiscal policy that sustains economic growth.

  • Stability – the capacity of government to meet future obligations with existing tax burdens.

  • Fairness – the capacity of government to pay current obligations without shifting the cost to future generations.

Because it is a new area of analysis and because making assumptions about the future can be done with a variety of techniques, there is no standard way of projecting taxes and burdens 30-50 years ahead. One approach is to examine the future from the vantage point of the country as a whole; another is to look at it from the position of an individual taxpayer who will receive a flow of costs and benefits from government; still another is to consider a similarly situated age cohort. Some techniques build on standard budget methods to project the future; others are grounded in accounting rules and analyse the future by means of a balance sheet. Some take a whole-of- government perspective; others focus on major programmes (such as social security) that have long-term implications. All require heroic assumptions about economic and social trends, such as rates of growth, price changes, and life expectancy. Rather than discuss methodological differences, this section relates various techniques to existing budget practices. If sustainability becomes an ongoing issue, it is highly likely that budget practices will evolve to incorporate an elongated timeframe into analyses of revenue and spending proposals.Fiscal sustainability is a problem when there is a gap between a targeted debt level and the debt that would ensue if tax and spending policies were continued without change.


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