What is financial system? The financial system of the state is a system for collecting and distributing state money. To add clarity to research, most economists prefer to consider some specific financial relations and institutions, highlighting them as the organizers of the public finance system.

The main and mandatory elements of the financial system are called:

Finances of the state, finances of organizations, finance households and individuals.

The main part of the money in the country is constantly moving from the category of public finance to the possession of citizens, from personal property goes to enterprises, from enterprises again to the state, and so on, like the water cycle. If we look at the financial system in this way, then the aspects governing cash flows become especially important. Each of the parts of the described structure has a different degree of organization and controllability. Most of all centralized and controlled appear to be state finances.

The structure of public finance include: budget as well as extra budgetary funds.

The budget is the main place of collection, storage and distribution, at the disposal of the state power of funds.

The budget is filled with tax revenues from citizens and organizations, another source is usually income from state property and enterprises, natural wealth, customs duties, etc. In countries with developed market economies taxes make up 70-80% of the budget revenue. A significant part of taxes is not collected directly from citizens, but in the form of indirect taxes on enterprises. The essence of the relationship does not change because the final payers of imputed taxes are still the population.

The expenditure part of the budget is the direction of funds for financing state programs. This may include defense expenditures, social benefits, and support for industries. Extra budgetary funds carry out similar to the budget, but more highly specialized functions. So from the Social Security Fund, pensions and benefits are paid, treatment and rehabilitation is financed, but the Fund cannot allocate funds for science or subsidies to agriculture. Other off-budget funds are similarly organized. The most difficult financial resources for state distribution are usually personal finances. To force an ordinary citizen to direct funds at the request of the state, you can either take part of the money through taxes, or attract them to the banking system with high interest on deposits.