ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Research on Accrual Budgeting as a Tool to Manage Government Debt

  • Kim, Bong-Hwan Graduate School of Public Administration, Seoul National University
  • Hur, Yea Seul Graduate School of Public Administration, Seoul National University

Asian Tax Journal Vol. 17 No. 1 (2016), pp. 247-268

Abstract

Government debt of South Korea has been rapidly increasing these days. With keen analysis, we suggest accrual budgeting as a tool to manage government debt. First, we review cases of other countries such as Australia, New Zealand, United Kingdom, and United States. We figure out that before implementing accrual budgeting, these countries all had common conditions － strong expertise in accounting and broad operational discretion given to public officers. Generally these countries has managed government debt successfully compared to average debt of OECD countries. This implies that we should carefully prepare before reforming budget system and devise new system which could effectively relieve public debt. It is reasonably expected that accrual budgeting would change behaviors of decision－makers such as people, politician, and public officers in budgeting process. This is because accrual budgeting make them recognize long－term debt and broaden their perspective. Throughout this process, it is expected that long－term fiscal sustainability would be improved. Most importantly, we propose how to implement accrual budgeting in practice. Most suitable system would be accrual budgeting as decision rule and as No－cash－in－hand－model. Also we suggest that initial accrual budgeting should apply only to certain policies such as public pension, large－scale construction and interest payment which all have high possibility to accrue large amount of liability. Lastly, we present actual accrual budget form of public pension and construction project. We contribute to accrual budgeting research in that we explain legitimacy and necessity of applying accrual accounting to budget system. Especially our study devise actual accrual budget form to use in practice, helping understand usefulness of accrual budget. <Ke

Keywords

  • Accrual Budgeting
  • Government Accounting
  • Accrual Accounting
  • Budget reform
  • Government Debt

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Asian Tax Journal

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