MINISTRY OF ECONOMIC DEVELOPMENT AND TRADE OF THE RUSSIAN FEDERATION
State educational institution
Higher professional education
"Krasnoyarsk State Trade and Economic Institute"
Department of Economic Theory and Jurisprudence
COURSE WORK
Discipline: Economic theory
On the topic: Fiscal policy of the state
Completed: Checked:
3rd year student Art. teacher
ECT groups 04-1 Gorzhiy Larisa
Zankova Olga Vasilievna
Igorevna
SHARIPOVO 2006
Introduction
1.1 The crowding out effect
1.2 Fiscal policy and taxes
1.3 The Impact of Fiscal Policy on Supply
2. Types of fiscal policy and their importance in economic regulation
2.1 Discretionary Fiscal Policy
2.2 Automatic fiscal policy (built-in stabilizer)
3. The mechanism for the implementation of fiscal policy in the transitional economy of Russia
Conclusion
Bibliographic list
Introduction
Fiscal(from Lat. fiscalis- official) policy - a set of financial measures of the state for regulation, government revenues and expenditures. It changes significantly depending on such strategic tasks as anti-crisis regulation, ensuring high employment, and fighting inflation.
The main instrument of government policy in the economic sphere is the state budget. A balanced budget means that government revenues, made up of taxes, fees, and other revenues, are equal to government spending. Unfortunately, the balance of expenses and incomes in most countries of the world is rarely achieved. The "normal" and most common occurrence is a budget where expenditures exceed revenues for one year. More rare is a budget that has a surplus, i.e. excess of income over expenses. State budget management is fiscal policy.
The state budget is the main instrument of fiscal policy. Its impact on the economy is enormous, because the state budget is a political variable. This means that politicians can arbitrarily change this variable, setting themselves very large macroeconomic targets. Through fiscal policy, aggregate spending and aggregate demand can be stimulated or limited. Budget deficits can arise for two main reasons. First, it can be caused by the deliberate actions of the government, which, out of necessity, decided to spend more than there is income. The resulting deficit is called an active budget deficit. Secondly, the budget deficit can be formed as a result of a recession, a decrease in real national income, which will reduce budget revenues. Such a deficit is called a passive budget deficit. For a long time, the prevailing point of view among economists was that the state budget should always be balanced. However, Keynesians already in the 30s had a different opinion. Even a relatively small amount of autonomous spending that can be added from some source will be enough to multiply the aggregate demand. And the government should spend a lot on education, medicine, pensions, road construction, etc. In addition, the government can manipulate taxes, which ultimately leads to changes in disposable income.
J. Keynes discovered that fluctuations in aggregate demand are the main culprit for economic instability. Therefore, he considered the stabilization of demand and its maintenance at a level that ensures full employment, the most important task. In accordance with the recommendations of J. Keynes, after the Great Depression, all Western countries began to implement a stabilization fiscal policy, which was then divided into several types.
1. Types, goals and main instruments of fiscal policy
Expansionary fiscal policy is carried out by increasing government spending and reducing tax rates, which leads to an increase in the budget deficit. The overspending (deficit) will be covered by the government through loans from the population, insurance companies, industrial firms, etc. It can borrow from the central bank as well.
In the event of a recessive rupture, an automatic restructuring mechanism will operate. However, Keynesians believe that this mechanism is slow. Factor price adjustments will take a long time to restore full employment. Therefore, the government should help this mechanism. Thus, an expansionary fiscal policy is carried out in the event of a recessional gap, when the economy operates below its potential. Keynesians believe that in this case, a planned budget deficit is necessary.
The restrictive fiscal policy is based on cutting government spending and raising tax rates. This type of fiscal policy is applied to bridge inflationary gaps. Reducing government spending will reduce aggregate demand. The same result can be achieved by raising taxes.
Countercyclical fiscal policy is to stimulate economic development in the opposite direction to where it is driven by the forces of cyclical development. This type of policy stimulates demand during a recession and constrains it during a recovery. This means that the government must provide for a planned budget deficit if the economy is threatened with a recession, or a budget surplus during an economic recovery. At the same time, countercyclical fiscal policy should simply maintain a level of aggregate demand sufficient to ensure full employment. It must do this in a way that does not provoke inflation.
However, fiscal deficits and surpluses resulting from expansionary, restrictive, or countercyclical fiscal policies can have different implications. Moreover, these consequences can influence a significant restructuring of the Keynesian model.
The fundamental goal of fiscal policy is to eliminate unemployment and inflation. During a downturn, the question of stimulating fiscal policy is on the agenda. It includes:
1) an increase in government spending, or 2) a reduction in taxes, or 3) a combination of 1 and 2. In other words, if there is a balanced budget in the starting point, fiscal policy should move towards the government budget deficit during a recession or depression.
Conversely, if there is excess demand-driven inflation in the economy, a contractionary fiscal policy corresponds to this case. Restraining fiscal policy includes:
1) a decrease in government spending, or 2) an increase in taxes, or 3) a combination of 1 and 2. Fiscal policy should be guided by a surplus of the government budget if the economy is faced with the problem of controlling inflation.
1.1 The crowding out effect
The decline in private spending as a result of the high interest rate arising from the high demand for loan capital to cover the budget deficit is called displacement effect. There are only two ways to finance the budget deficit. The entire budget deficit means that the government, without enough revenues to cover the costs, lives on debt. Therefore, the first way to cover the deficit is to issue government securities (bonds). These securities create demand in the market for loan capital and compete for credit with securities of corporations and with other borrowers. As a result, the price of the loan increases - the interest rate.
A high percentage is a signal for consumers to cut back on purchases of interest-sensitive goods (house, car, durable goods). A high percentage is a signal for investors to postpone spending on new equipment, construction of plants and factories. After all, a high percentage increases the opportunity costs of investment projects. This produces a crowding-out effect, i.e. a reduction in private spending due to the high interest rate that arose from increased government spending that created a budget deficit.
If expansive fiscal policy is capable of causing crowding out, then restrictive policy is counterproductive. Reducing the interest rate creates better conditions for buying goods on credit and for additional investments. At the same time, this reduces the anti-inflationary significance of the restrictive policy, which is applied in the phase of revival and development of the inflationary gap.
In the absence of trade restrictions, goods in all markets are exchanged at the same price (excluding price differences due to different taxes and transport costs). The pricing principlealignment reflects that producers will increase supply in markets if prices are higher than costs (and vice versa).
This principle is also valid in the markets of loan capital (credit). With modern technology, anyone who has the financial means to borrow money can offer them in the markets of North America, Australia, Europe, Japan, etc. And everywhere the interest rate (loan price) will be the same, excluding the possible difference due to taxes and miscellaneous expenses to carry out operations. Example: The US government cuts taxes, leading to budget deficits due to reduced budget revenues. A loan is needed to cover the deficit. The government turns to the loan capital market, the demand for credit will increase, and with it the interest rate will rise. How will Europeans react to all this, for example? They will start moving their funds to the US loan market, where the cost of the loan has become higher. The more such transfers are, the more they will put pressure on the interest rate, forcing it to fall. How will foreign credit inflows affect the crowding out effect? This inflow, by lowering the interest rate, should soften the contraction in demand and reduce the volume of "displaced" demand. A European must convert his money into US dollars before transferring his money to the United States. Consequently, the demand for US dollars will increase in European foreign exchange markets (i.e., markets where one currency is exchanged for another). Growing demand for the dollar will raise the dollar's price, and the dollar will rise against other currencies. How will a stronger dollar affect US exports and imports? A more "expensive" dollar will make imports cheaper for Americans. After all, now you can buy a little more goods abroad with it. But at the same time, this will make American exports more expensive for foreigners: now, to buy an American product for $ 1, you need to pay a little more francs, marks, pounds, etc. for it. Any economist in this situation will predict that the United States will now export less and import more. Net exports will decline, and this will lead to a reduction in aggregate demand. Some of the displaced domestic demand will take the form of a drop in net exports. And the inflow of loans from abroad will restrain the increase in the interest rate. But an even more moderate interest rate will "crowd out" investment and purchases of credit-responsive consumer durables.
3.5.1. The concept and content of fiscal policy. Types and instruments of fiscal policy
Fiscal policy Is a policy that involves using the government's capabilities: to collect taxes and spend state budget funds to regulate the level in conditions of business activity and to solve various social problems.
This is the state policy in the field of government spending and taxes.
This policy are carried out by the legislature since they control taxation and the state budget.
The main objectives of fiscal policy:
1. Smoothing fluctuations in the economic cycle.
2. Stabilization of economic growth rates.
3. Achieving a high level of employment.
4. Decrease in inflation rates.
Basic tools:
1. Government spending.
2. Taxes.
Fiscal policy affects the national economy through commodity markets. Changes in government spending and taxes are reflected in aggregate demand and, through it, affect macroeconomic goals.
The main task of fiscal policy is to balance the macroeconomic system. In general, fiscal policy is aimed at saving full employment and producing a non-inflationary gross national product. Usually fiscal policy is carried out in the definition of discretionary and non-discretionary instruments (in the form of a “fiscal mixture”) and gives the maximum effect in the short term.
Fiscal policy there are two types:
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Discretionary This is an active policy. This is a deliberate manipulation of taxes and government spending. It is carried out in the long term. Basic tools: 1. State employment program(financial labor exchanges, placement of government orders in private enterprises). 2. Development of various social programs. 3. Public works program(production of public goods - public transport, communications, improvement of parks, squares). Change in tax rates- the main tool. |
Politics built-in stabilizers passive policy. It is based on the fact that tax revenues and a significant portion of government spending automatically cause a change in the relative level of taxes and budgetary spending. Basic tools: Income tax; Unemployment benefits; Social payments; Indexation of income. |
During the recession, stimulating fiscal policy(fiscal expansion) - consists of:
Increased government spending;
Reducing taxes;
Combining increased government spending with tax cuts.
This leads to deficit financing, but provides a reduction in the decline in production.
In an inflationary environment deterrent policy.
It's called fiscal restriction:
Reducing government spending;
Increase in taxes;
Combining government spending cuts with rising taxation.
This policy focuses on a positive budget balance, which causes a reduction in production.
Built-in stabilizers policy(passive) - an economic mechanism that automatically reacts to changes in the economic situation without the need to take any steps on the part of the government.
The main stabilizers are changes in tax revenues.
During a boom, tax revenue automatically increases, reducing purchasing power and curbing economic growth.
During an economic downturn, tax revenues are reduced, and there is a gradual increase in purchasing power, restraining the economic downturn.
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Plan
Introduction
Chapter 1. The concept of fiscal policy, its goals and instruments
1.1 Concept of fiscal policy
1.2 Types of fiscal policy
1.3 Fiscal policy instruments
Chapter 2. The effectiveness of the fiscal policy of the state
2.1 Statement of the problem and research methodology
2.2 Economic methods for assessing the effectiveness of fiscal policy
2.3 Analytical methods for assessing the effectiveness of fiscal policy
Chapter 3. Features of fiscal policy in Russia
3.1 Advantages and Disadvantages of Fiscal Policy
3.2 Prospects for the development of fiscal policy in the Russian state
Conclusion
List of used literature
Introduction
The main task of the state at all stages of its development is to stabilize the economy. At the present time, the state is actively using instruments of intervention in the economy. The main 2 types of government intervention in the market economy include fiscal and monetary policy.
The purpose of this course work is to study the fiscal, or the so-called fiscal policy of the state. The role of fiscal policy in holistic economic management is great. Being one of the most important instruments of state regulation of the economy, it directly forms the state budget, state monetary revenues. In market conditions, fiscal policy is the core part of state economic policy.
Fiscal policy as the most important element of the financial policy of the state performs a number of important functions, such as mobilization and attraction of funds necessary for the functioning of the state, their distribution in order to solve the socio-economic problems of the country.
The theoretical framework for fiscal policy is fairly well developed. But this area of economics has not exhausted itself. Many controversial and unresolved problems of the implementation of fiscal policy, its impact on the development of the state require further improvement and solutions. In the past, for a long time, the fiscal policy was considered by economists only from the aspect of the proportions of the distribution of the country's output.
The relevance of the study of fiscal policy has determined the choice of the topic of this course work. In a market economy, it is especially important to know the essence, functions, types and instruments of fiscal policy, as well as the mechanism of its action for a more correct orientation in the existing situation in the country in order to make the correct management decision.
The purpose of our work was to study the mechanism for implementing the fiscal policy of the state.
The main objectives of this course work are to study:
The essential characteristics of fiscal policy,
Types of fiscal policy,
Fiscal policy instruments,
Effectiveness of the state fiscal policy
Given the relevance of the study of fiscal policy, it is not surprising to note that this topic was studied by many economists, who in their own way gave an answer to the question about the essence of fiscal policy, the impact of its instruments on the economic situation in the state. Almost all textbooks pay great attention to the problems of fiscal policy and the mechanisms of its functioning.
When working on the topic of this course work, the works of foreign and domestic authors devoted to the financial policy of the state, textbooks, articles of economic magazines and newspapers, statistical data, as well as materials from Internet sites were used.
Chapter 1. The concept of fiscal policy, its goals and instruments
1.1 Concept of fiscal policy
Fiscal policy is a system of regulation related to government spending and taxes. Government spending refers to the cost of maintaining the institution of the state, as well as government procurement of goods and services. These can be various types of purchases, for example, the construction of roads, schools, medical institutions, cultural facilities, purchases of agricultural products, foreign trade purchases, purchases of military equipment, etc. at the expense of the budget. The main distinguishing feature of all these purchases is that the consumer is the state itself. Usually, speaking of government purchases, they are divided into two types: purchases for the state's own consumption, which are more or less stable, and purchases to regulate the market.
Government spending plays a significant role in the socio-economic development of society. The existing large deficit of the state budget in Russia exceeds reasonable limits and leads to a financial imbalance in the national economy. Therefore, the issue of increasing the efficiency of public spending, giving them a regulatory role in ensuring the stability of socio-economic development, and shaping a new quality of economic growth is highly relevant.
It should be emphasized that any state, regardless of its political system, pursues one or another fiscal policy, since for its existence and functioning it needs financial resources, which it receives from taxes. But the main task of fiscal policy is not so much to ensure the balance of the budget as to balance the macroeconomic system. With a lack of private spending to maintain aggregate demand, an increase in government spending is necessary. Consumer expenditures of the population, investment expenditures of enterprises are made by separate entities and are not always mutually consistent with each other. Fiscal policy allows adjusting the dynamics of GNP in the desired direction.
The policy of government spending and taxes is one of the most important instruments of government regulation of the economy aimed at stabilizing economic development. Government spending and taxes have a direct impact on the level of total expenditures, and, consequently, on the volume of national production and employment of the population. In this regard, the well-known Western economist J. Galbraith noted that the tax system began to turn from an instrument for increasing government revenues into an instrument for regulating demand, which, in his opinion, is an organic need of the industrial system. economic fiscal expenditure
Fiscal policy is a fairly strong tool in the fight against the negative phenomena of the cyclical nature of economic development. In fact, the main task of fiscal policy is to smooth out the shortcomings of the market element by consciously influencing aggregate demand and aggregate supply in the market. But it must be borne in mind that not a single instrument in the economy is 100% perfect.
The fiscal state influences the increase or decrease in national production by varying tax rates and implementing government spending. The theoretical substantiation of these actions was the calculations of the American economist A. Laffer, who proved that the result of tax cuts is an economic recovery and an increase in government revenues (Laffer curve).
Graphically, the Laffer curve looks like this (Fig. 1).
Figure 1- Laffer Curve
The abscissa in this graph shows the value of the interest rate r, and the ordinate shows the value of tax revenues R. If r = 0, the state will not receive any tax revenues. As soon as r = 100%, all incentives for production completely disappear (for all incomes of producers are withdrawn), that is, the result for the state is the same - zero. For any other values (r<0<100%) государство налоговые поступления в том или ином размере получает. При каком-то конкретном значении ставки (r=r0) общая сумма этих поступлений становится максимальной (R0=Rmax). Отсюда вытекает следующий вывод: рост процентной ставки только до определенного значения (r=r0) ведет к увеличению налоговых поступлений, дальнейшее же ее повышение обусловливает, напротив, их уменьшение. Так, R0>R1, R0> R2.
The general properties of the Laffer curve can be characterized as follows: since with a weakening of the tax pressure, some subjects of production begin to work more intensively, maximizing their income, while others reach the desired value of the latter with less effort, the curve in question is flat and reacts relatively weakly to minor changes in tax rates ... In addition, the reaction of economic agents to the dynamics of these rates does not appear instantly, but after a certain time interval.
The Laffer curve reflects the objective dependence of the growth of government revenues on the decrease in tax rates. At the same time, it is impossible to theoretically reveal the value of r0; it is determined empirically. In this case, it is extremely important to identify where the actual tax rate is located - to the right or to the left of r0. And since major macroeconomic experiments are fraught with serious shocks, this question is usually answered by analyzing the response of producers to tax breaks in specific industries.
1.2 Types of fiscal policy
Fiscal (fiscal policy) is a system for regulating the economy through changes in government spending and taxes.
Distinguish between discretionary and automatic forms of fiscal policy. Discretionary policy refers to the maneuvering of taxes and government spending in order to change the real volume of national production, control of the level of employment and the rate of inflation. This form of fiscal policy is opposed by its automatic form. "Automatism" is "built-in stability" based on the provision of budget revenues by the tax system depending on the level of economic activity.
Automatic fiscal policy. Automatic fiscal policy is an economic mechanism that allows to reduce the amplitude of cyclical fluctuations in employment and output levels without resorting to frequent changes in the government's economic policy. Built-in stabilizers inherent in it, which are income taxes, unemployment benefits, expenses for retraining programs for workers, etc., are in principle necessary, they reduce the amplitude of fluctuations during the economic cycle. For example, if the economy is in a downturn, the marginal tax rate is reduced due to a decrease in taxable income; disposable income will be smaller also because social benefits increase. At the same time, disposable income declines to a lesser extent compared to income before taxes. The marginal capacity to consume in a downturn increases as those receiving unemployment benefits use almost all of it for consumption. If the economy is in the recovery phase, disposable income does not increase to the same extent as total income before taxes, as tax rates rise and social benefits decrease. Another advantage of automatic stabilizers is that they reduce income inequality. Progressive income taxes and transfer payments are instruments of income redistribution in favor of the poor. In addition, the stabilizers are already built into the system; no legislative or executive decision is required to put them into effect. Their essence lies in linking tax rates with the amount of income received. Almost all taxes are structured in such a way as to ensure the growth of tax revenues with an increase in the net national product. This applies to personal income tax, which is progressive in nature; income tax; added value; sales tax, excise taxes.
Figure 2 shows the built-in stabilizers. On it, the size of government spending is constant. In fact, they change. But these changes depend on the decisions of parliament and government, and not on the growth of GNP. Therefore, the graph does not show a direct relationship between government spending and an increase in NPP. Tax revenues rise during the recovery. This is because sales and revenues are increasing. Withdrawal of part of the income by taxes restrains the rates of economic growth and inflation. As a result of the acting forces, in addition to the efforts of the government, overheating of the economy due to imbalances during the recovery is prevented.
Figure 2- Built-in stabilizers, where: G - government spending; T - tax revenue
During this period, tax revenues exceed government spending (T> G). There is a surplus - a surplus of the state budget, which allows you to pay off government debt obligations taken during the depression period of the economy.
The graph also reflects the fall in tax revenues during the period when the NNP decreases, i.e., production falls, which leads to the formation of a state budget deficit (G> T). If the volume of tax revenues remained at the same level during the economic crisis, the economic situation for business would mean higher economic risks, which provoked a further curtailment of production. This means that a decrease in tax revenues during this period objectively protects society from an escalation of the crisis and weakens the decline in production.
Built-in stabilizers do not eliminate the causes of cyclical fluctuations, but only limit the range of these fluctuations. Therefore, built-in stabilizers of the economy, as a rule, are combined with measures of discretionary fiscal policy of the government aimed at ensuring full employment of resources.
Discretionary fiscal policy includes the regulation of government spending and taxes in order to eliminate cyclical fluctuations in output and employment, stabilize the price level, and stimulate economic growth. In the United States, the employment laws of 1946 and the Lamphrey-Hawkins of 1978 make the federal government responsible for ensuring full employment through the use of monetary and fiscal policies. This task is extremely difficult for many reasons, not least because public funds are spent on implementing many programs, not only on stabilizing the economy and ensuring economic growth, for example, on social security programs, strengthening the country's road network, flood control , improving education, replacing old and dangerous bridges, environmental protection, basic research.
There are two types of discretionary policies:
Stimulating,
Restraining.
Stimulating fiscal policy is carried out during a period of recession, depression, includes an increase in government spending, tax cuts and leads to a budget deficit.
In the short term, the goal is to overcome cyclical downturns in the economy and involves an increase in government spending, tax cuts or a combination of these measures.
In the longer term, tax-cutting policies can lead to an increased supply of factors of production and an increase in economic potential.
The implementation of these goals is associated with the implementation of a comprehensive tax reform, accompanied by a restrictive monetary policy of the Central Bank and a change in the optimization of the structure of government spending.
Restraining fiscal policy is carried out during the boom and inflation period, includes cutting government spending, raising taxes, and leading to a surplus of the state budget.
It aims to limit the cyclical recovery of the economy and involves reducing government spending, increasing taxes or a combination of these measures.
In the short term, these measures help to reduce demand inflation at the cost of rising unemployment and a decline in production. In a longer period, a growing tax wedge can serve as the basis for a decline in aggregate supply and the deployment of a stagflation mechanism (recession, or a significant slowdown in economic development), especially in the case when government spending cuts are carried out proportionally across all budget items and priorities are not created in favor of government investment in labor market infrastructure.
Both discretionary and automatic fiscal policies play an important role in the stabilization measures of the state, but neither one nor the other is a panacea for all economic ills. As for automatic policy, its inherent built-in stabilizers can only limit the range and depth of fluctuations in the economic cycle, but they are not able to completely eliminate these fluctuations.
More problems arise with discretionary fiscal policy. These include:
The presence of a time lag between decision-making and their impact on the economy;
Administrative delays;
Addiction to incentive measures (tax cuts are politically popular, but tax increases can cost parliamentarians a career).
Reasonable use of tools of both automatic and discretionary policies can significantly affect the dynamics of social production and employment, reduce inflation and solve other economic problems.
1.3 Fiscal policy instruments
The set of fiscal policy instruments includes government subsidies, manipulation of various types of taxes (personal income tax, corporate tax, excise taxes) by changing tax rates or lump-sum taxes. In addition, the instruments of fiscal policy include transfer payments and other types of government spending. Different instruments affect the economy in different ways. For example, an increase in the lump sum tax results in a decrease in total spending but does not change the multiplier, while an increase in personal income tax rates will cause a decrease in both total costs and the multiplier. The choice of different types of taxes - personal income tax, corporate tax or excise tax - as an instrument of influence has various effects on the economy, including on incentives that affect economic growth and economic efficiency. The choice of a particular type of government spending is also important, since the multiplier effect can be different in each case. For example, there is a perception among policymakers that defense spending provides a lower multiplier than other types of government spending.
Depending on the phase of the cycle in which the economy is located, and the type of fiscal policy corresponding to it, the instruments of the state's fiscal policy are used in different ways. So, the instruments of the stimulating fiscal policy are:
increasing government procurement;
tax cuts;
increase in transfers.
The instruments of the restraining fiscal policy are:
reduction in public procurement;
increase in taxes;
reduction in transfers.
A slightly different list of fiscal policy instruments is presented in the textbook "Economics" by academician G.P. Zhuravleva. According to this source of literature, the instruments of discretionary fiscal policy are public works, changes in transfer payments, and manipulation of tax rates.
The author of this textbook includes changes in tax revenues, unemployment benefits and other social benefits, subsidies to farmers as instruments of automatic fiscal policy.
Analyzing the literature sources, one can come to the conclusion that the main instruments of fiscal policy are changes in taxes and transfer payments.
One of the main instruments of fiscal policy are taxes, which are funds forcibly withdrawn by the state or local authorities from individuals and legal entities necessary for the state to carry out its functions.
Taxes have three main functions:
fiscal, which consists in the collection of funds for the creation of state funds and material conditions for the functioning of the state;
economic, involving the use of taxes as a tool for redistributing national income, influencing the expansion or restraint of production, stimulating producers in the development of various types of economic activity;
social, aimed at maintaining social equilibrium by changing the ratio between the incomes of individual social groups in order to smooth out inequality between them.
There are different types of taxes in the modern economy.
Direct taxes are taxes on income or property of taxpayers. In turn, direct taxes are subdivided into real taxes, which were most widespread in the first half of the 19th century, and which include land, house, trade, securities tax;
personal, including income, taxes on corporate profits, on capital gains, on excess profits.
Indirect taxes consist of excise taxes, value added taxes, sales taxes, turnover taxes, and customs duties.
Depending on the authority at the disposal of which certain taxes are received, state and local taxes are distinguished. In Russian conditions, these are federal, federal, local taxes.
Depending on the use, taxes are divided into:
general, intended to finance current and capital expenditures of the budget, without assigning to any specific type of expenditure;
special taxes for specific purposes.
Depending on the nature of the rates, taxes are distinguished:
firm (fixed), established in an absolute amount per unit of taxation, regardless of various economic indicators related to business activity;
regressive, in which the percentage of income withdrawal decreases with increasing income;
proportional, manifested in the fact that regardless of the amount of income, the same rates apply;
progressive, in which the percentage of withdrawals increases as income increases.
A group of American specialists headed by A. Laffer studied the dependence of the amount of tax revenues to the budget on income tax rates. This relationship is reflected by the Laffer curve.
Tax rates are set in the form of a percentage, which determines the proportion of income withheld. Until a certain increase in the tax rate, incomes grow, but then they begin to decline. As the tax rate rises, the desire of enterprises to maintain high production volumes will begin to decline, and corporate incomes will decrease, and with them corporate tax revenues. Consequently, there is such a value of the tax rate at which tax revenues to the state budget will reach the maximum value. It is advisable for the state to set the tax rate at this value. Laffer's group has theoretically proved that a tax rate of 50% is optimal. At this rate, the maximum amount of taxes is reached. At a higher tax rate, the business activity of firms and workers sharply decreases, and then incomes flow into the shadow economy.
However, in many countries, tax rates are significantly higher than the optimal level, and this is due to the action of other factors that are not taken into account in the theoretical model. For example, in countries gravitating towards strong government regulation, the desire to increase the budget through the revenue side will prevail. Tax rates in such countries are high. Conversely, if a country gravitates towards a liberal market structure, towards minimal government intervention in the economy, tax rates will be lower. In addition, the desire to have a socially oriented economy and allocate a significant part of budgetary allocations to social assistance does not allow a significant reduction in tax rates - in order to avoid a lack of budgetary funds for social needs. The high tax rates in the Russian economy are primarily due to the budget deficit, the lack of public funds for the implementation of socio-economic programs and the weak hope that the reduction in tax rates will lead to an increase in production and economic recovery. In order to somehow mitigate the tax pressure for individual taxpayers, tax incentives are applied - a form of lowering tax rates or, in the extreme case, exemption from paying taxes. Sometimes tax breaks are used as an incentive based on the fact that a tax cut is adequate to provide the taxpayer with additional funds equal to the amount of the reduction. The problem of choosing and setting rational tax rates is faced by any state.
Obviously, the higher the taxes, the less income the subject will have, which means less to buy and save. Therefore, a reasonable tax policy presupposes a comprehensive account of those factors that can stimulate or slow down economic development and the welfare of society.
Such an instrument of state fiscal policy as taxes is closely related to another instrument of fiscal policy - government spending. Funds withdrawn in the form of taxes go to the state budget, subsequently spent on various purposes of the state. In the conditions of the current legislation of the Russian Federation, the main part of the budget is replenished from payments of taxpayers - legal entities.
Currently, the point of view has become widespread about the need for an additional significant reduction in tax rates for main taxes. In support of this, the authors point out that despite a temporary drop in tax revenues, in the long term, investment conditions are improving, the production of goods and services will increase, employment of the population will increase and, due to the growth of the tax base, government revenues will begin to grow.
Government or government spending refers to the cost of maintaining the institution of the state, as well as government purchases of goods and services.
State purchases of goods and services can be of various types: from construction at the expense of the budget of schools, medical institutions, roads, cultural objects to the purchase of agricultural products, military equipment, samples of unique products. This also includes foreign trade purchases. The main distinguishing feature of all these purchases is that the state itself is the consumer. Usually speaking about public procurement, they are divided into two types: purchases for the state's own consumption, which are more or less stable, and purchases to regulate the market.
The state increases its purchases during the recession and crisis and reduces during the recovery and inflation in order to maintain the stability of production. At the same time, these actions are aimed at regulating the market, maintaining a balance between supply and demand. This goal is one of the most important macroeconomic functions of the state.
Government spending plays a significant role in the socio-economic development of society. Hence, they are objectively necessary, and at the same time, their exceeding reasonable limits can lead to financial instability in the national economy, an excessive state budget deficit.
Government spending takes the form of:
state order, which is distributed on a competitive basis;
construction at the expense of capital investments;
defense spending, administration, etc.
The bulk of government spending goes through the state budget, which includes the budgets of the federal government and local authorities.
The state budget is an annual plan of government expenditures and the sources of their financial coverage (income). In modern conditions, the budget is also a powerful lever of state regulation of the economy, impact on the economic situation, as well as the implementation of anti-crisis measures.
The state budget is a centralized fund of monetary resources, which the government of the country has at its disposal to maintain the state apparatus, the armed forces, as well as perform the necessary socio-economic functions.
Expenditures show the direction and purpose of budget allocations and perform the functions of political, social and economic regulation. They are always targeted and, as a rule, irrevocable. The irrevocable provision of public funds from the budget for targeted development is called budget financing. This mode of spending financial resources differs from bank lending, which assumes the repayment nature of the loan. It should be noted that the irrevocability of the provision of financial resources does not mean arbitrariness in their use. Whenever financing is applied, the state develops the procedure and conditions for using money for the targeted direction and ensuring general economic growth and improving the life of the population.
The structure of government spending in each country has its own characteristics. They are determined not only by national traditions, the organization of education and health care, but mainly by the nature of the administrative system, structural features of the economy, the development of defense industries, the size of the army, etc.
Government transfers, being one of the instruments of fiscal policy, represent payments by government bodies that are not related to the movement of goods and services. They redistribute government revenues from taxpayers through benefits, pensions, social security payments, etc. Transfer payments have a lower multiplier than other government expenditures because some of these amounts are saved. The multiplier of transfer payments is equal to the multiplier of government spending times the marginal capacity to consume. The advantage of transfer payments is that they can be directed to specific groups of the population. Social transfers (pensions, scholarships, various benefits) are included in the average income, and these payments can increase the family's budget by 10-12%.
Fiscal policy instruments influence the economic situation in their own way, helping to achieve the goals set for fiscal policy. The main instruments of the state's fiscal policy are changes in taxes and transfer payments. Fiscal policy instruments are interconnected and their role in the implementation of one or another state policy is great.
Chapter 2. Efficiencyfiscal policy of the state
2.1 Statement of the problem and research methodology
Recently, many studies have been carried out in which an attempt is made to assess the effectiveness of certain aspects of the fiscal system by finding Laffer points for specific types of tax collections.
At the same time, the concept of the Laffer curve was originally created in relation to the concept of the total tax burden, that is, the entire mass of tax deductions. Further, we adhere to precisely this understanding of the problem and, therefore, we will look for Laffer points for the average macroeconomic indicator of the tax burden. By the latter, we mean the share of tax revenues in the country's consolidated budget in the gross domestic product (GDP).
Our study is based on the assumption that the volume of production X, as reflected by the value of GDP, depends on the level of the tax burden
where T is the sum of tax revenues to the country's budget.
The dependence X (q) is approximated by a nonlinear function, the parameters of which are to be quantified. Identifying the function X (q) will allow the Laffer points to be calculated. In this case, we will distinguish Laffer points of the first and second kind. Let us give the corresponding definitions.
A Laffer point of the first kind is a point q * at which the production curve X = X (q) reaches a local maximum, i.e., when the following conditions are satisfied:
dX (q *) / dq = 0; d2X (q *) / dq 2<0.
A Laffer point of the second kind is a point q ** at which the fiscal curve T = T (q) reaches a local maximum, i.e. when the following conditions are satisfied:
dT (q **) / dq = 0; d2T (q **) / dq 2<0.
Economically, the Laffer point of the first kind means that limit of the tax burden at which the production system does not go into recession. The Laffer point of the second kind shows the magnitude of the tax burden, beyond which it becomes impossible to increase the mass of tax revenues.
The identification of two Laffer points and their comparison with the actual tax burden allows one to assess the efficiency of the country's tax system and the directions for its optimization. Let's consider some of the approaches that can be used to solve the problem.
2.2 Economic methods for assessing the effectiveness of fiscal policy
In the general case, the problem posed can be solved by econometric methods, which are based on the postulate that the volume of production depends nonlinearly on the magnitude of the tax burden. In this case, the volume of GDP can be approximated by a polynomial regression of the following form:
where b i - parameters subject to statistical evaluation based on retrospective time series.
Considering formula (1) and the amount of taxes:
you can write the following ratio:
To carry out the appropriate calculations, the entire information array must be represented by dynamic series of two "primary" indicators - X and T. Knowing these values, using formula (2), it is possible to calculate a retrospective series for such a "secondary" indicator as q. Further, as a result of computational experiments, the polynomial (1) of the corresponding degree is found. It is desirable that this be a quadratic or, in extreme cases, a cubic function, since a higher order of the polynomial will subsequently complicate the search for Laffer points.
Taking into account the specifics of series smoothing operations, econometric models of type (1) have a number of obvious features. First, to obtain the values of the parameters b i, it is necessary to have sufficiently long and "good" in the statistical sense time series. Second, the parameters b i are constant over time, which in some cases leads to the invariability of the values of the Laffer points. This is not entirely legitimate, since it would be more logical to assume that Laffer points are quantities "floating" in time.
Commenting on the approach proposed above, which is based on a primitive polynomial approximation of the process of economic growth by a tax function (1), one should immediately make a reservation: in this case, a purely technical, instrumental problem is solved without taking into account intrasystem economic relations. There is no explicit modeling of the functional properties of the system, but they are indirectly captured by dependence (1). At the same time, although the functional dependence (1) itself is nonlinear, regression (1), on the contrary, is linear with respect to the parameters included in it and, therefore, no special technical difficulties arise in its identification. This is one of the essential advantages of the proposed model scheme.
2.3 Analytical methods for assessing the effectiveness of fiscal policyandki
Taking into account that the retrospective time series for the Russian economy have not yet been formed, which are sufficient to carry out correct econometric calculations, it is possible to use other methods of assessing the effectiveness of fiscal policy. These alternative approaches include methods of point-piecewise approximation of the analyzed process using a power function, which are fundamentally different from econometric methods based on interval approximation. In this case, for each reporting point, its own function X = X (q) is constructed with the corresponding values of its parameters. Since the number of function parameters can be more than one, then for their unambiguous assessment it is necessary to use additional information about the increments of variables over time. Taking into account the nonlinearity of the relationship between the volume of production and the level of the tax burden, a quadratic polynomial should be taken as an approximating function. Two calculation options are possible here: generalized three-parameter and simplified two-parameter. Let's consider them in more detail.
1. Three-parameter method. This method is based on the approximation of the process of economic growth by a three-parameter quadratic function, where the level of the tax burden acts as an argument:
where a, b and g are parameters to be estimated.
Then, in accordance with (2), the amount of tax revenues is determined as follows:
At each moment in time, the volume of GDP depends on the level of the tax burden, and the nature of this dependence is given by formula (4). However, for an unambiguous determination of the three parameters a, b, and g, relation (4) is not enough, and therefore it is necessary to draw up two more equations that include these parameters. Such equations can be written down by passing from functions (4) and (5) to their differentials:
When passing from (4) and (5) to relations (6) and (7), we used the assumption that the differentials of the variables X and q are satisfactorily approximated by finite differences: dX ~ D X; dT ~ D T; dq ~ D q. This assumption is traditional for computational mathematics and for the case under consideration seems to be quite legitimate. Then, in applied calculations, the indicators D X, D T and D q mean the increments of the corresponding values for one time interval (year) between two reporting points, i.e.
where t is the index of the time (year).
Thus, equation (4) describes "point" economic growth, that is, at a specific point in time t, while equations (6) and (7) reproduce the "interval" growth of production and tax revenues for the period between the current (t) and subsequent (t + 1) reporting points. In accordance with this approach, equations (4) and (5) define families of production and fiscal curves, and relations (6) and (7) fix their curvature, thereby making it possible to choose the required functional dependencies from the designated families.
Such a calculation scheme is based on the construction of the system of equations (4), (6) and (7) and its solution with respect to the parameters a, b and g, which makes it possible to characterize this scheme as analytical or algebraic. The solution of system (4), (6), (7) gives the following formulas for the estimated parameters:
The identification of the parameters of functions (4) and (5) makes it possible to determine the Laffer points in an elementary way. Moreover, the Laffer point of the first kind q *, when dX / dq = 0, is determined by the formula
and the Laffer point of the second kind q **, when d2T / dq 2 = 0, is found by solving the following quadratic equation
and as a result is calculated by the formula
An additional study of the properties of functions (4) and (5) will make it possible to determine whether the found stationary points are Laffer points. If the stationary points turn out to be points of a local minimum or their values go beyond the range of admissible values, then there are no Laffer points.
An alternative to the considered three-parameter method can be an approach based on the use of a truncated polynomial of the third degree as a production function:
In this case, the number of parameters does not change, remaining equal to three. In this case, the procedure for finding Laffer points is corrected taking into account the initial cubic dependence, and stationary points for the fiscal curve will be found as a result of solving the cubic equation. It is clear that such an algorithm can generate two Laffer points of the second kind. In our opinion, due to the greater unambiguity and clarity in practice, the first, basic version of the three-parameter method should be used.
It should be noted that the analytical method for assessing the effectiveness of fiscal policy makes it possible to use functional dependencies with the number of parameters not exceeding three. A larger number of parameters requires the addition of additional equations to the basic system (4), (6), (7), which is impossible due to the narrow formulation of the original problem.
2. Two-parameter method. This method is based on the approximation of the economic growth process by a truncated quadratic function, which includes only two parameters:
Then the sum of fiscal revenues is
An additional restriction imposed on the functional properties of the production system is given by an equation similar to (6):
The constructed system of equations (14), (16) is sufficient for finding the parameters b and g. As in the case of using the three-parameter method, equation (14) reproduces the "point" properties of the production system, and equation (16) - "interval". In this case, there is no auxiliary equation that sets the dynamic properties of the fiscal system; By default, it is assumed that the amount of taxes received is completely determined by the activity of the production system and the level of fiscal pressure.
Formulas for estimating parameters based on solution (14), (16) have the form
Laffer points of the first and second kind are determined from (14) and (15) according to the corresponding formulas:
Analysis of the second-order conditions shows the following: for stationary points (19) and (20) to be really Laffer points, it is necessary and sufficient to satisfy two inequalities: b> 0 and g<0.
Chapter 3. Features of fiscal policy in Russia
In a market economy, there are certain mechanisms of self-organization and self-regulation, which come into effect immediately as soon as negative processes in the economy are revealed. They are called built-in stabilizers. The self-regulation principle that underlies these stabilizers is similar to the principle on which the autopilot or refrigerator thermostat is built. When the autopilot is on, it maintains the aircraft's heading automatically based on feedback signals. Any deviation from the set course due to such signals will be corrected by the control device. Economic stabilizers work in a similar way, due to which automatic changes in tax revenues are carried out; payments of social benefits, in particular for unemployment; various state programs of assistance to the population, etc.
How does the self-regulation, or automatic change, of tax receipts take place? A progressive taxation system is built into the economic system, which determines the tax depending on income. As income rises, tax rates progressively increase, which are approved by the government in advance. When income increases or decreases, taxes are automatically raised or lowered without any intervention by the government and its management and control bodies. Such a built-in stabilization system for levying taxes is quite sensitive to changes in the economic environment: during a period of recession and depression, when the incomes of the population and enterprises are falling, tax revenues are automatically reduced. On the contrary, during periods of inflation and boom, nominal income rises, and therefore taxes are automatically raised.
There are different points of view in the economic literature on this issue. A hundred years ago, many economists argued for the stability of tax collections, because, in their opinion, it contributes to the stability of the economic situation of society. Currently, there are many economists who hold the opposite point of view and even claim that the objective principles underlying the built-in stabilizer should be preferred to the incompetent intervention of government bodies, which are often guided by subjective opinions, inclinations, preferences. At the same time, there is also an opinion that one cannot rely entirely on automatic stabilizers, since in certain situations they may inadequately respond to the latter, and therefore need regulation by the state.
Payments of benefits for social assistance to the unemployed, the poor, large families, veterans and other categories of citizens, as well as the state program to support farmers, the agro-industrial complex are also carried out on the basis of built-in stabilizers, because most of these payments are realized through taxes. And taxes, as you know, grow progressively along with the incomes of the population and enterprises. The higher these incomes, the more tax deductions to the fund to help the unemployed, pensioners, the poor and other categories of those in need of state assistance are made by enterprises and their employees.
Despite the significant role of built-in stabilizers, they cannot completely overcome any fluctuations in the economy. With significant fluctuations in the economic system, more powerful government regulators are included in the form of discretionary fiscal and monetary policies.
Discretionary fiscal policy also includes additional social spending. Although unemployment benefits, pensions, benefits for the poor and other categories of the needy are regulated with the help of built-in stabilizers (they increase or decrease as taxes are received depending on income), nevertheless, the government can implement special programs to help these categories of citizens in difficult times of economic development. ...
Thus, we come to the conclusion that an effective fiscal policy should be based, on the one hand, on self-regulation mechanisms embedded in the economic system, and on the other, on careful, careful discretionary regulation of the economic system by the state and its governing bodies. Consequently, the self-organizing regulators of the economy must function in concert with the conscious regulation organized by the state.
Generally speaking, the entire experience of the development of a market economy, especially of our century, testifies to the fact that in the development of the economy and other systems of social life, self-organization should keep pace with the organization, i.e. conscious regulation of economic processes by the state.
However, such regulation is not easy to achieve. To begin with, it is necessary to timely forecast recession or inflation before they have started yet. It is hardly advisable to rely on statistical data in such forecasts, since statistics summarize the past, and therefore it is difficult to determine the trends of future development from them. A more reliable tool for predicting future GDP levels is the monthly leading indicators analysis, which is often referred to by policymakers in developed countries. This index contains 11 variables that characterize the current state of the economy, including the average working week, new orders for consumer goods, stock market prices, changes in orders for durable goods, changes in the prices of certain types of raw materials, etc. It is clear that if there is, for example, a reduction in the working week in the manufacturing industry, a decrease in orders for raw materials, a decrease in orders for consumer goods, then with a certain probability one can expect a decline in production in the future.
However, it is difficult to pinpoint the exact time when the recession will occur. But even in these conditions, it will take a long time before the government takes appropriate measures. In addition, in the interests of the upcoming election campaign, it can implement such populist measures that will not improve, but only worsen the economic situation. All such non-economic factors will run counter to the needs of achieving production stability.
3.1 Advantages and Disadvantages of Fiscal Policy
The advantages of fiscal policy include:
1. Multiplier effect. All fiscal policy instruments, as we have seen, have a multiplier effect on the value of equilibrium aggregate output.
2. Absence of external lag (delay). External lag is the period of time between the decision to change the policy and the appearance of the first results of its change. When the government makes a decision to change the instruments of fiscal policy, and these measures take effect, the result of their impact on the economy manifests itself rather quickly.
3. The presence of automatic stabilizers. Since these stabilizers are built-in, the government does not need to take special measures to stabilize the economy. Stabilization (smoothing of cyclical fluctuations in the economy) occurs automatically.
Disadvantages of fiscal policy:
1. The crowding out effect. The economic meaning of this effect is as follows: an increase in budget expenditures during a recession (an increase in government purchases and / or transfers) and / or a decrease in budget revenues (taxes) leads to a multiplicative increase in total income, which increases the demand for money and raises the interest rate on money. market (loan price). And since loans are primarily taken by firms, the rise in the cost of loans leads to a reduction in private investment, i.e. to "crowding out" part of the investment costs of firms, which leads to a reduction in the value of output. Thus, a part of the total volume of production is “crowded out” (underproduced) due to the reduction in the value of private investment spending as a result of the increase in the interest rate due to the government's stimulating fiscal policy.
2. The presence of an internal lag. Internal lag is the period of time between the need to change the policy and the decision to change it. Decisions to change the instruments of fiscal policy are made by the government, but their introduction is impossible without discussion and approval of these decisions by the legislative authority (Parliament, Congress, State Duma, etc.), i.e. giving them the force of law. These discussions and agreements can take a long period of time. In addition, they only take effect from the next fiscal year, further increasing the lag. During this period of time, the situation in the economy may change. So, if initially there was a recession in the economy, and measures of stimulating fiscal policy were developed, then at the moment they begin to operate in the economy, an upturn may already begin. As a result, additional stimulus can lead the economy to overheat and provoke inflation, i.e. have a destabilizing effect on the economy. Conversely, constraining fiscal policy measures developed during the boom period, due to the presence of a prolonged internal lag, may exacerbate the recession.
3. Uncertainty. This disadvantage is typical not only for fiscal, but also for monetary policy. Uncertainty concerns:
· Problems of identifying the economic situation It is often difficult to accurately determine, for example, the moment when the period of recession ends and recovery begins, or the moment when the recovery turns into overheating, etc. Meanwhile, since at different phases of the cycle it is necessary to apply different types of policies (stimulating or restraining), an error in determining the economic situation and the choice of the type of economic policy, based on such an assessment, can lead to destabilization of the economy;
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1. Fiscal policy of the state.
The fiscal policy of the state involves the use of the government's ability to collect taxes and spend state budget funds to regulate the level of business activity, to solve various social problems.
The main levers of fiscal policy of the state are changes in tax rates, tax base, types of taxes, their number and size of state or their directions in accordance with the specific goals of society. The development of fiscal policy is the prerogative of the country's legislative bodies, since it is they who control taxation and spending of state budget funds.
In economic theory, there are different points of view on the methods of conducting fiscal policy of the state.
Keynesian supporters traditionally focus on creating effective aggregate demand as a stimulus for economic development. Therefore, they see tax cuts as the main factor in the growth of aggregate demand and, accordingly, in the growth of real output. At the same time, in the short term, there is a reduction in budget revenues, which results in the formation or an increase in the budget deficit.
Supporters of the theory of "supply economics" consider the reduction in tax rates as a factor in the increase in aggregate supply.
1.1 Discretionary Fiscal Policy.
Discretionary fiscal policy is based on government decisions, which, by manipulating tax rates or the structure of taxation, the level of government spending, affects the formation of aggregate supply, the real volume of the national product, employment levels, inflation and prices.
Discretionary fiscal policy, depending on the phase of the economic cycle, can be constraining or stimulating (deficit).
Restraining fiscal policy is carried out at the stage of economic recovery in order to overcome inflation caused by excess demand. Its purpose is to limit business activity, to reduce the real volume of GNP in comparison with its potential level. The mechanism for implementing a restrictive policy involves an increase in net taxes (the difference between government revenue from tax collection and government transfer payments) or their growth in combination with a decrease in government spending (purchases and orders), which compensates for the expected recovery in aggregate demand in the private sector of the economy.
In the context of inflation caused by excess demand (inflationary growth), restraining discretionary fiscal policy consists of:
2. increasing taxes;
3. a combination of government spending cuts with growing taxation (given that the multiplier effect of government tax cuts is greater than the multiplier effect of tax increases).
Stimulating (deficit) fiscal policy is implemented during a period of decline in social production with a significant level of unemployment through measures aimed at reducing net taxes or a combination of reducing net taxes and increasing government spending.
During a downturn, incentive discretionary fiscal policy consists of:
1.reduction of government spending;
2. tax cuts;
3. a combination of growth in government spending with tax cuts (given that the multiplier effect of an increase in government spending is greater than the multiplier effect of a tax cut).
The stabilizing effect of taxes and government spending on economic development is due to the fact that they have a multiplier effect and have a direct impact on aggregate demand, the volume of national production, and employment.
The choice of government forms and methods of stabilization policy also depends on the used conceptual model of government regulation.
1.2 Non-discretionary fiscal policy: built-in stabilizers.
Built-in stabilizers mean certain features in government revenues that play a compensatory role in the economy, regardless of government decisions applied. This is explained by the fact that the volume of tax revenues and a significant part of government spending are closely related to the activity of the private sector. Tax rates are structured in such a way that tax revenue rises when national income rises and decreases when national income falls.
Transfer payments also play a certain stabilizing role. Some of them, such as child allowances and payments for medical treatment, do not depend on fluctuations in national income. But most of the transfer (unemployment benefits, additional payments, etc.) changes in inverse relationship with fluctuations in the business cycle: during an economic recovery, payments of this kind are significantly reduced and grow during the period of production.
To some extent, the necessary changes in the relative levels of government spending and taxes are introduced automatically. This so-called automatic or built-in stability is not included in discretionary fiscal policy considerations. This happened because we assumed the existence of a lump-sum tax, which ensures the withdrawal of the same tax amount for different increases in the NNP. The built-in stability arises due to the fact that in reality our tax system ensures the withdrawal of such a net tax (net tax is equal to the total amount of tax minus transfer payments and subsidies), which varies in proportion to the size of the NNP. Almost all taxes will generate an increase in tax revenue as the NNP grows. In particular, the individual approach to income tax has progressive rates and as the NNP grows, it gives more than proportional increases in tax revenues. Moreover, as the NNP grows and the exchange of purchases of goods and services grows, there will be an increase in revenues from corporate tax, sales tax and excise taxes. And payroll taxes increase as new jobs are created during the economic recovery. On the contrary, if the NNP falls, tax revenues from all of these sources will fall. Transfer payments (or "negative taxes") have exactly the opposite behavior.
Automatic or built-in stabilizers.
If tax revenues fluctuate in the same direction as the PNP, then deficits, which tend to automatically appear during recessions, help overcome the recession. On the contrary, budgetary surpluses, which tend to automatically manifest themselves during economic booms, will help to overcome possible inflation.
The figure serves as a good illustration of how the tax system enhances built-in stability. Government expenditures (G) in this scheme are considered specified and independent of the size of the NNP; expenditures are approved by Congress at constant fixed levels. But Congress does not determine the amount of tax revenue, rather, it determines the amount of tax rates. Tax revenues then fluctuate in the same direction as the level of NPP that the economy is reaching. A direct link between tax revenues and NNP is recorded in the rising T line.
The economic significance of these direct relationships between tax revenues and NPPs becomes particularly important when we think about two things. First, taxes represent a drain or loss of potential purchasing power in the economy. Secondly, it is desirable to increase the volume of such leaks (withdrawals) during periods when the economy is moving towards inflation, and, on the contrary, the amount of withdrawals of purchasing power should be minimized during a period of slowing growth. In other words, the tax systems depicted in the figure create some element of stability in the economy, automatically causing changes in tax revenues and in the government budget that counteract both inflation and unemployment. A built-in stabilizer is any measure that tends to increase the government's deficit (or reduce its surplus) during a downturn and increase its surplus (or reduce its deficit) during inflation without the need for any special steps on the part of politicians. As the NNP grows in a period of prosperity, tax revenues both increase and - because they represent a drain - contain the economic recovery. When the NNP shrinks, tax revenues are automatically reduced during the recession, and this reduction softens the economic downturn. That is, with a falling NNP, tax revenues also fall and push the state budget from budget surplus to deficit. Using the notation in the figure, the low level of the national product of CNP 3 will automatically cause the appearance of a stimulating budget deficit; A high inflation-related product level of PNP 2 will automatically create a constraining budget surplus.
From the figure, it is clear that if tax revenue changes vigorously following the change in NNP, the slope of the T line in the figure will be steep and the vertical distance between T and G - that is, deficits or surpluses - will be greater. Conversely, if tax revenues change very little with changes in NNP, the slope will be sloping and there will be little built-in stability.
There is no doubt that the built-in stability provided by our tax system has mitigated the severity of economic fluctuations. However, built-in stabilizers are not able to correct unwanted changes in the equilibrium PNP. All stabilizers do is limit the scope or depth of economic fluctuations. Therefore, Keynesian economists agree that adjusting inflation or recession of any significant magnitude requires discretionary fiscal action by Congress - that is, changes in tax rates, tax structure, and expenditures.
2. Government spending and GDP.
State budget - an estimate of the income and expenditure of the state for a certain period, most often for a year, compiled with an indication of the sources of funds. The budget has revenues and expenditures, which in the planned perspective must be balanced.
The state budget is drawn up by the government and approved by the highest legislative bodies. That. significant financial instruments for influencing economic processes appear in the hands of the state. As a rule, these are government purchases, grants, transfer payments (TR), investments (I).
The totality of measures to influence the economy through taxes and government spending is the essence of fiscal policy. It is based on the manipulation of the revenue and expenditure parts of the state budget. The main government expenditures include:
1. social payments;
2. investments in the economy, grants, subsidies (injections);
3. the costs of maintaining the administration;
4. spending on defense and maintaining internal order;
5. granting a loan to internal and external business entities;
6. repayment of debt on a loan;
7.expenditures on science, culture, health care, education, etc.
Discretionary fiscal policy is understood as the state's deliberate regulation of the level of taxation and government spending in order to influence the real volume of national production, employment, and inflation.
To analyze this impact, we will use the figure:
"The impact of government spending on national output and changes in macroeconomic equilibrium."
Let us accept some assumptions that simplify the analysis of the impact of fiscal policy on aggregate demand, namely: assume that fiscal policy affects only aggregate demand, government spending does not affect consumption and investment, and net exports are zero.
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Let's start with an analysis of the impact of government spending on aggregate demand. Recall the graph of total expenditures (consumption + investment, or C + I). Introduction to economic analysis of government spending (G) shifts the schedule of total expenditures (C + I) upward and causes an increase in the gross national product. The point of macroeconomic equilibrium shifts up the line in the bisector.
Government spending has a similar effect on aggregate demand to investment and, like investment, has a multiplier effect. The government spending multiplier shows how the volume of GNP changes as a result of changes in government spending:
K g = ΔVNP / ΔG,
Where G is government spending;
K g is the multiplier of government spending.
The government spending multiplier can also be quantified in terms of economic categories such as the marginal propensity to save (MPS) and the marginal propensity to consume (MPC):
K g = 1/1-MPC = 1 / MPS.
Thus, ΔVNP = ΔG * K g.
Thus, the impact of government spending on the national economy is carried out through aggregate demand. With an increase in government spending on the purchase of goods and services, the value of total expenditures in the market increases accordingly, thereby stimulating aggregate demand and an increase in the volume of national production, gross national product. Reducing government spending entails, therefore, a reduction in the gross national product.
In turn, the introduction of additional costs or an increase in the rates of existing ones leads to a decrease in the disposable income (income after taxes) of taxpayers, which is reflected in the entire amount of total expenses (they decrease).
3. Taxation. Net taxes multiplier.
Fiscal policy has an impact solely on demand, that is, on the amount of aggregate spending and aggregate demand. But economists have also recognized that fiscal policy — especially tax changes — can alter aggregate supply and therefore influence the changes that fiscal policy can induce in the relationship between price level and real production.
Supporters of the theory of "supply economics" consider the reduction in tax rates as a factor in the increase in aggregate supply. They believe that reducing the tax burden leads to an increase in income:
1.population, and, therefore, an increase in savings
2. business, and, therefore, to increase the profitability of investments.
Thus, tax cuts cause an increase in national production and income, which, in turn, not only does not reduce tax revenues to the budget and does not cause a budget deficit, but at lower tax rates provides an increase in tax revenues to the budget by expanding the tax base ( according to the "Laffer effect"). These causal relationships are illustrated in the figure.
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Initially, equilibrium within the framework of the national economy (aggregate demand AD 1, aggregate supply AS 1) was achieved with the volume of production Q 1 and the price level P 1. The reduction in tax rates on household income led to an increase in the aggregate supply from AD 1 to AD 2. With the same aggregate supply, this led to an increase in the equilibrium volume of GNP and an increase in the price level (respectively - Q 2 and P 2). An increase in aggregate demand with a simultaneous decrease in tax rates on income of entrepreneurs led to an increase in aggregate supply from AS 1 to AS 2. A new equilibrium has been achieved within the framework of the national economy (aggregate demand AD 2, aggregate supply AS 2) with the volume of production Q 3 and the price level P 3.
It should be noted that the impact of taxes on demand is faster. In the short term, tax cuts will definitely lead to an increase in aggregate demand and a decrease in tax revenues to the budget, although in the long term tax revenues may increase as a result of the achieved economic growth. In other words, the causal links between fiscal policy and aggregate supply are designed for long-term effects, and the chain of these links is large.
Let us now consider the effect of taxes on national production and the value of GNP. To simplify the analysis, we will assume that the state introduces a lump-sum tax, the amount of which does not change for any value of GNP (constant tax). The introduction of this tax will lead to a decrease in the disposable income of taxpayers (income after tax), therefore, their expenses will also decrease. This, in turn, will affect the entire amount of expenses: it will decrease.
With constant I and G, the graph of total expenditures (C + I + G) will move downward and cause a reduction in GNP. The point of macroeconomic equilibrium will move down the 45 degree line, as illustrated in the figure
The opposite picture will develop with tax cuts.
At the same time, the impact of taxes on the volume of GNP is specific in comparison with the impact of investments and government spending. The point is that disposable income is used not only for consumption, but also for savings. Consequently, a decrease in disposable income reduces not only consumption, but also savings.
What will be the decrease in direct consumption in this case? It depends on the marginal propensity to consume (MPC). To determine the reduction in consumption as a result of the introduction of the tax, it is necessary to multiply the amount of the tax increment (T) by MPC or C = T * MPC. (Likewise, multiplying the tax increment by the MPS will show the reduction in savings resulting from the additional tax or C = T * MPS.)
Taxes, like investment and government spending, have a multiplier effect. But the investment multiplier is less than the multiplier of government spending and investment, since, for example, when taxes are cut, consumption increases only partially (part of disposable income goes to increasing savings), while each unit of growth in government spending or investment has a direct impact on the value of GNP.
The tax multiplier is equal to the multiplier of government spending times the MPC.
K t = 1/1-MPC * MPC = MPC / MPS.
The amount of taxes depends on the amount of income. Therefore, during the period of rapid growth of GNP (during the period of growth), tax revenues automatically increase (with a progressive tax rate and also due to the expansion of the tax base), which reduces the purchasing power of the population and restrains economic growth. Conversely, during an economic downturn, the amount of income withdrawn decreases, i.e. there is a gradual increase in purchasing power, which forms effective demand and curbs the recession. In other words, progressive taxation in a period of inflationary growth leads to a loss of purchasing power, and vice versa, in a period of economic growth slowdown, it provides a minimum loss of purchasing power.
4. Features of the fiscal policy of the Republic of Belarus.
4.1 Reforming the budgetary system in Belarus
Over the past years, there has been significant progress in building a budget system that meets modern requirements. In fact, it underwent a transformation from administrative-command mechanisms for the redistribution of all public resources to a combination of a market-based tax system and budget expenditures, which mainly ensure the functioning of the state social protection system, budget organizations and the public sector of the economy. Direct subsidies to the non-state sector play an insignificant role (however, it should be borne in mind that this is largely due to the slow pace of privatization of state property). The system of public procurement on a competitive basis is being developed. A generally accepted classification of budget revenues and expenditures (including economic), as well as sources of internal and external financing of the budget deficit and types of public debt has been introduced.
The new budget classification formed the basis for the new version of the Law of the Republic of Belarus "On the budgetary system in the Republic of Belarus", which made significant amendments to the terms and definitions of budgetary legislation, concretized the principles of building the budgetary system and organizing the budgetary process. The still unfinished formation of the treasury system of budget execution has already led to a significant increase in the efficiency of public finance management.
Despite these achievements, the existing problems in the organization of the budgetary process are still so great that it is not yet possible to speak about the completion of the formation of the basis of the budgetary system, which can be developed and improved in the coming years. Such a foundation has yet to be created. The fundamental problems characterizing the current state of the budgetary system (excluding the above tax problems) are as follows:
The formation of the state budget continues to be carried out, in general, according to the "from the achieved" method. Interaction with departments, regions and the legislature, which determines budget parameters, is in the nature of subjective bargaining, not based on assessing the effectiveness of budget expenditures. This bargaining (instead of an objective analysis of economic feasibility) ultimately determines the choice and amount of funded and refinanced liabilities of the state. Despite significant progress in improving budget classification, the authorities, especially at the regional level, have not yet followed the new rules, which leads to both low quality budget planning and a low degree of transparency of budgets at all levels.
The quality of forecasting the main macroeconomic indicators (GDP, inflation, exchange rate, etc.) that underlie the budget remains insufficient, which creates conditions for numerous and not always justified manipulations at the stage of budget execution.
Despite certain achievements in the direction of creating an effective public financial management system, all its elements function with a low degree of efficiency. This also applies to inter-budgetary relations and to the entire budgetary process, including the stages of budgetary policy formation, budget execution, accounting and control, budget transparency and budgetary decision-making procedures, debt and asset management.
The adoption of the new edition of the Law of the Republic of Belarus "On the budgetary system in the Republic of Belarus" did not solve all the pressing problems of increasing the efficiency of the budgetary process, especially in terms of interbudgetary relations.
Until today, there is a widespread use of targeted budget funds and related lending mechanisms as instruments of budget financing. These instruments tend to be highly ineffective as they lead either to excessive costs not explicitly foreseen in the annual budget laws, or to the loss of accountability mechanisms at the lower level and corresponding financial accountability at the higher level. Extra-budgetary funds continue to play an unjustifiably significant role in the public finance system, which enhances the opaque and uncontrolled nature of the redistribution of public resources.
Until now, government revenues and expenditures in national and foreign currencies are planned and accounted for separately. At the same time, the procedure for drawing up and executing a plan for foreign exchange income and budget expenditures is not legally regulated.
Although the budget execution process has improved markedly in recent years thanks to the emergence of the treasury system, the problems in this area are still quite large. The treasury system made it possible to streamline the spending of funds (in accordance with annually adopted laws) mainly at the republican level by setting intra-year line-item spending limits, as well as registering contracts for the supply of goods and services concluded by budget recipients. The current control over the targeted spending of funds by budgetary organizations has also been strengthened. However, in a number of cases, the acts of the Ministry of Finance regulating these processes do not take into account the real economic situation and ultimately impede the efficient spending of funds. The treasury system only slightly affects the execution of local budgets. The procedures for the intra-annual reallocation of resources and the use of additional income are far from perfect. It is not possible to get away from the accumulation of accounts payable for individual budget items.
The quality of budgetary control, carried out both by the control and audit bodies of the Ministry of Finance, and even more so by the departmental control services, remains clearly insufficient. Since, in accordance with the current legal acts, the main attention is paid to the compliance of budget execution with the indicators laid down in the law, i.e. first of all, for the targeted use of budgetary funds, then neither material nor professional resources are enough to assess the actual effectiveness of government spending. To the greatest extent, these problems are inherent in the regional level of the budget system.
Public debt management continues to be largely driven by budgetary needs and the need to provide financial support to unprofitable industries without adequate consideration of the impact of the public debt market on savings and private investment, and without sufficient attention to the effectiveness of various debt instruments. Debt management practically does not involve the management of government assets. In the management of state property, there is no complexity and approaches based on the assessment of efficiency.
All of the above problems require a serious reform of budgetary legislation with an orientation in the long term towards the preparation and adoption, by analogy with the Russian Federation, of the Budget Code of the Republic of Belarus.
In accordance with the generally accepted practice of effective organization of the budget process, the main objectives of this reform are:
Ensuring the stability and predictability of the budget system by creating conditions for the full and sustainable fulfillment of financial obligations of the state and the concentration of budget resources on solving key tasks while reducing obviously inefficient expenditures;
Transparency of budgets of all levels and procedures for making budget decisions, maximum consolidation of off-budget and targeted budget funds;
Creation of an effective public finance management system at all stages of the budget process;
Reducing the debt burden on the economy and transition to new principles of public debt and assets management;
Reform of interbudgetary relations based on a clearer delineation of expenditure and tax powers between the republican and local budgets and the formation of new systems of financial support for the regions.
To achieve these goals, a phased implementation of a set of measures will be required, both in terms of improving budget legislation and specific decisions of the current fiscal policy.
At the first stage, an inventory and assessment of the effectiveness of budgetary expenditures and obligations, including state target programs, should be carried out, the necessary clarifications should be made in the current budget classification and the rules for its application. The inventory should affect all categories of expenditures and budget liabilities, all levels of the management of budgetary funds. On its basis, it will be possible to assess the effectiveness of budget expenditures. It is necessary to gradually eliminate unjustified budget subsidies that create unequal conditions for competition and reduce the potential for economic growth, and to concentrate financial resources on the implementation of the main functions of the state - to increase budget spending on social programs, health care, culture, the judiciary, law enforcement and defense.
Budgeting should be based solely on the assessment of the effectiveness of expenditures (as opposed to the "from the achieved" method), in full accordance with the powers of various levels of government. Planning budget expenditures will be greatly facilitated as a result of bringing the state's obligations in line with its resources, and the main task will not be to select a portfolio of funded obligations, but to revise the structure of expenditures arising from the priorities of state policy, the degree and forms of state participation in the economy.
It is necessary to continue improving intra-annual budget planning in the process of budget execution, including setting monthly spending limits, promptly selecting sources of financing the deficit, and clarifying the procedures for using additional budget revenues.
Improvement of budget accounting and control procedures includes measures to develop methodological work and implement in practice all the principles of budget classification in full at all levels of the budget system. It is also necessary to exclude the overlap of control functions in the system of control and audit bodies.
The formation of the treasury system of budget execution at the republican and local levels should be completed as soon as possible.
In order to increase the transparency of budgets and budgetary procedures, it is necessary to introduce a requirement for mandatory publication of budgetary reports for all sections of the budget classification and at all levels of the budget system, providing a methodological basis for this. The procedures for public procurement of goods and services should also become as open as possible. Consolidation of off-budget and targeted budget funds in the budgets of all levels of expenditure should be completed as soon as possible. In particular, it is necessary to gradually abolish off-budget innovation funds, as well as local and republican targeted budget funds, built on deductions from proceeds from the sale of goods and services, with the transfer of the corresponding expenses to the consolidated budget on a general basis with full treasury control.
When developing a strategy and practical actions to reduce the debt burden on the economy, one should proceed not only from the structure of repayment and servicing of public debt, but also from the projected macroeconomic trends, as well as from the need to develop domestic financial markets.
Reforming the budget and tax systems is a prerequisite and basic for an effective fiscal policy, which, nevertheless, has its own logic, principles and methods of development.
Belarus, like most of the post-Soviet countries, has chosen the path of gradual reforms. The initial liberalization of prices (1992-1993) in the context of a pro-inflationary monetary policy aimed at preventing a fall in GDP created conditions for a rapid rise in prices. Average monthly growth rate CPI in 1992-1994. was more than 30%. Relative stabilization (1995-2000) and tightening of monetary policy showed the entire weakness of the unreformed real sector. Since the fall of 2000, GDP growth stimulated by active credit issuance at selected “growth points” has been selected as a priority development goal since autumn 2000 - Agroindustrial complex and housing construction. The President set a goal for the government - to achieve the 1990 production figures. 1997 - 2001 Belarus demonstrates high rates of GDP growth, which has increased by 40% over these years. The "Belarusian economic miracle" became possible thanks to the financial assistance of Russia, which wrote off 1 billion rubles of debt for energy resources, emissions, subsidence of fixed and circulating assets of enterprises. Nevertheless, the inefficiency of the chosen model became evident already in 2001, when the growth of quantitative indicators began to be accompanied by a deterioration in qualitative ones. Profitability and solvency fell, accounts payable and receivable and the number of unprofitable enterprises increased.
The growth of GDP took place against the background of a decrease in the indicators of real incomes of the population. In 1997 - 1998, the salary was 40 USD, and in 1999. the number of people receiving incomes below the subsistence level was already 50%. In 2000, as a result of the campaign to increase wages on the eve of the presidential elections, the accrued average monthly wages reached the 1995 level. 30% of Belarusians now live below the poverty line. Pensioners receive 40 USD of pension. Families with two or more children are automatically categorized as needy.
Belarus has become an outsider in the implementation of market reforms, having the worst indicators of market transformation and 148th place in the rating of economic freedom. Amount of attracted FDI is 123 USD per person, of which a significant part is the Belarusian-Russian gas pipeline construction.
Thus, the declared growth of gross indicators has not yet justified the hopes of the Belarusian people. Repressive macroeconomic policies and an opaque legal environment contribute to capital flight from the country, massive business going into the shadows, and a lack of private investment and savings.
Therefore, proclaiming a course to attract foreign investment, Belarus should initiate large-scale economic reforms. As the experience of our neighbors shows, this leads to an increase in the qualitative and quantitative indicators of economic development and the well-being of their citizens. Thus, according to international experts, refusing reforms, Belarus increases the costs of missed opportunities, wasting precious time.
1. Functions and roles of finance. Financial system. The economic structure of any society is currently mixed, i.e. the state intervenes in the economy of the free market. The main purpose of this intervention is to correct market problems and organize those markets that are beyond the power of the market system. For the implementation of activities, the company has defined the category of finance. Finance is an economic relationship regarding the formation, distribution and use of funds of funds (financial resources) between:
· The state, on the one hand, and legal entities and individuals, on the other;
· By the legal entities themselves;
· Individual states.
The system of these relations is called the financial system. It includes the following 4 links:
1. National finance: budgets of various levels (federal, federal subjects); funds of social property and personal insurance; off-budget social funds, stock market.
2. Territorial finance.
3. Enterprise finance.
4. Household finances.
The functions of finance are the creation and use of funds.
The roles of finance are control and regulatory (either stimulate or oppress).
2. The budget. The budgetary system of the Russian Federation. The central category in financial science is budget. It is actually a fund of funds and therefore all parts of the financial system have it. Distinguish between the state budget - centralized, performing national functions; and decentralized - performing the functions of individual teams, groups of people. The state budget in the Russian Federation is understood as the federal budget and the budgets of the subjects of the federation.
Functions of the budget - the creation and use of funds of funds. The roles of the budget are economic, social, political, control.
The construction of the budgetary system is based on the definition of ownership. In the Russian Federation, budgetary relations are legally regulated by the Budget Code of the Russian Federation. According to the Budget Code of the Russian Federation (Article 6), the budgetary system of the Russian Federation is based on economic relations and the state structure of the Russian Federation, regulated by legal norms, the aggregate of the federal budget, the budgets of the constituent entities of the Russian Federation, local budgets and budgets of state extra-budgetary funds.
Rice. 27. Scheme of the budgetary system of the Russian Federation
In a market economy, the relationship between budgets of different levels is based on the principle of fiscal federalism, according to which regional budgets are autonomous and not included in the federal budget. Each budget has its own sources of income and costs are determined according to the distribution of property. At the same time, the principle of providing financial assistance is in effect: the federal budget - the budgets of the constituent entities of the Russian Federation, the budgets of the constituent entities of the Russian Federation - to the local budgets.
With the help of the budget, the state implements a combination of centralized and local interests of the regions through the distribution of taxes, budgetary subsidies, transfers; as an economic document, the budget reflects political and social changes in society.
The budget is a balance of income and expenses and consists of two interrelated parts: revenue and expenditure. The source of budget revenues is the national income created by the real sector of the economy. With a shortage, national wealth is attracted (the totality of material goods created by the labor of previous generations).
3. Budget revenues. Taxes. Tax system. Laffer curve. All sources of income are divided into 2 groups - internal and external. Internal sources - national income and national wealth; external sources - external loans (national income of another country).
Types of budget revenues: 1) tax revenues (80-90% of all revenues); 2) non-tax income (income from the economic use of property); 3) loans; 4) emission (issue) of money (only for the federal budget).
Taxes are imperative (presuppose relations of power and subordination), non-equivalent monetary relations, in the process of which a budget fund is formed. Signs of tax:
1. Compulsion - the subject of the tax has no right to refuse to pay. Strict sanctions.
2. Individual gratuitousness for the taxpayer - nothing in return (no right, no document). Differs from duties (right of import-export)
3. Legitimacy - taxes are levied only on legitimate transactions.
In the Russian Federation, taxes are not targeted. Entering the budgetary fund, taxes are depersonalized. All rules for collecting taxes in the Russian Federation are regulated by the Tax Code of the Russian Federation.
The main functions of taxes are fiscal (main) and economic. The fiscal function is filling the budget. The economic function is the use of taxes as a tool for the redistribution of national income, the formation of the interests of economic entities in the development of various types of activities, the provision of state influence on the real process of production and investment of capital investments.
When considering the types of taxes, it is necessary to understand that their classification is carried out depending on:
· Subjects of taxation (at the same time, taxes from individuals and legal entities are distinguished);
· Objects of taxation (direct and indirect taxes are distinguished);
· Economic impact on the level of income (progressive, proportional, regressive, firm);
· Budget structures (federal, republican, local).
To study taxes, it is necessary to highlight its elements. Elements of tax, without which the tax cannot be considered established:
· Subject of tax - a taxpayer - a legal or natural person who is obliged to pay taxes;
· Object of tax - property or income that serve as the basis for taxation;
· Tax base - cost, physical or other characteristics of the object of taxation;
· Tax rate - the amount of tax charges per unit of measurement of the tax base;
· Tax period - the time that determines the period for calculating the tax and the timing of its payment (as a rule, a calendar year);
· Tax incentives - reduction of the amount of taxation: introduction of a non-taxable minimum, establishment of tax immunity (exemption from taxes for individuals or categories of payers), lowering tax rates, granting a tax credit (deferred tax payments), etc .;
· Tax cadastre - a list of tax objects with an indication of their profitability;
· Tax policy - the procedure for calculating taxes;
· Tax mechanism - a set of organizational and legal norms and methods of taxation management The tax mechanism together with tax policy are in constant motion and depend on the economic policy of the state;
· Tax system - a set of taxes, fees and duties in force on the territory of the country, methods and principles of their construction.
There are 2 types of tax system: generic and global. In the sheduly, all income is divided into parts (shedules) and each is taxed in a special way - at different rates, benefits and other elements of the tax. In the global tax system, all income of individuals and legal entities is taxed equally.
Basic principles of taxation (formulated by Adam Smith):
1. The principle of uniformity of taxation. Means that the level of the tax rate should be set taking into account the capabilities (income level) of the taxpayer.
2. The principle of certainty of taxation. The tax should not be arbitrary, it should be precisely determined in terms of size, time, method of payment, and have a one-time taxation nature.
3. Convenience of taxation. Each tax must be collected at a time and at a time that is most convenient for the payer.
4. Minimal cost of tax collection.
Tax collection methods:
1) Cadastral (cadastre - table, reference book) - when the tax object is differentiated and an individual tax rate is set for each group, which does not depend on the profitability of the object.
2) Based on the declaration. Declaration - a document in which the taxpayer provides the calculation of income and tax from him, thus, the payment of tax is made after receiving income.
3) At the source. The tax is paid by the person paying the income, and the taxpayer receives income reduced by the amount of the tax.
The level of the tax burden is calculated by the share of taxes in the gross domestic product: Tax burden = N / Y.
An excessive tax burden reduces disposable income and, accordingly, incentives for capital expenditures, inhibits scientific and technological progress, and slows down economic growth. This is demonstrated by A. Laffer's curve showing the relationship between tax revenues and tax rates: with an increase in tax rates, the amount of budget revenues first increases, but a further increase in rates may lead to a reduction in tax revenues.
Rice. 28. Laffer Curve
Taxes have a multiplier effect. Taxes, by changing the amount of disposable income, affect both consumption and saving. Tax multiplier (MRt) looks like:
MRt 
The essence of the multiplier-multiplier effect in a market economy is that tax cuts will lead to an increase in national income, and by an amount greater than the decrease. The multiplier will act in the same way with the increase in taxes, but with the opposite effect.
The cumulative effect of a change in taxes is equal to their change multiplied by a multiplier:
The tax multiplier has a much larger effect on reducing aggregate demand than the government spending multiplier.
4. Government spending and the formation of aggregate demand. The multiplier of government spending and taxes. The content and nature of government spending are organically linked to the functions of the state. All government spending can be grouped:
In the areas: social, economic, national defense, management, international activities;
By economic content: government procurement, transfer payments, payments on government debt.
Public procurement is the government's demand for military and civilian goods, the latter can be intended for the own needs of state enterprises or be of a regulatory nature (as in the case of purchasing agricultural products in order to maintain the market price. Public procurement creates a guaranteed sales market, there is no risk of non-payment, prices are stable, the sale of products can be carried out in large batches under pre-signed contracts, it is possible to receive tax and credit benefits.
Transfer payments are payments that are made to the population without any obligations arising from the latter, these are pensions, benefits, scholarships, etc. Transfer payments are not classified as productive economic activities of the state.
The growth of government spending leads to an increase in GNP, and more than the initial impetus. The multiplier of government spending (MRg) characterizes the ratio of GNP growth to government spending and is equal to the reciprocal of the marginal propensity to save.
MRg 
The multiplier effect is due to the fact that an increase in government spending raises income and leads to an increase in consumption, which in turn increases income, which contributes to a further increase in consumption, etc.
The cumulative effect of an increase in government spending is equal to the increase multiplied by a multiplier:
Since the multiplier operates in both directions, it is clear that cuts in government spending will reduce GNP and total revenues more than cuts in government spending.
5. Budget deficit. State debt. The state budget, like any balance sheet, presupposes the equalization of income and expenditure. However, when the budget plan is adopted, no coincidences are possible - an excess of income over expenses (surplus) and an excess of expenses over income (deficit). The International Monetary Fund recognizes a deficit within 2-3% of GNP as acceptable.
Fiscal imbalance is a means of combating inflation and decline in production (see next question).
The nature of the budget balance (deficit or surplus) depends on the state of the economy as a whole. Government spending is independent of income (GNP) and taxes are proportional to income. Thus, with a low income, there will be a deficit, with a high one - a surplus.
However, government spending and taxes themselves can influence the level of aggregate demand and the volume of GNP. The increase in spending will lead to an increase in revenues, which will increase tax revenue, as a result of which, the deficit can be reduced. With a reduction in taxes, there will be an increase in aggregate demand, production, income, and, consequently, tax revenues.
Distinguish between cyclical and structural budget deficits.
Structural deficit (full employment budget deficit) characterizes the difference between revenues and expenditures of the state budget at a given level of taxation and government spending and the natural level of unemployment.
A cyclical deficit is a deficit caused by a decline in production, the actual unemployment exceeding its natural level.
Rice. 29. Structural and Cyclical Fiscal Deficits
If in conditions of full employment the GNP is equal to Q1, then with the existing taxation system and the given level of government spending, the budget deficit is ab. With a production level equal to Q2, the same taxation system and the same government spending, the actual budget deficit will be equal to ce, including cd is a structural deficit, and de is a cyclical deficit, the result of falling production volumes (Q2 is less than Q1).
The growing structural deficit means that the government is pursuing a stimulating policy: increasing spending and cutting taxes, which causes an increase in aggregate demand and has a positive effect on output. The reduction in the structural deficit, on the contrary, indicates the implementation of a restrictive fiscal policy.
Given the size of the budget deficit, its impact on the economy depends on the methods of financing. If the government borrows from the central bank or issues money (“turns on the printing press”) to cover the deficit, then an inflationary spiral is unfolding. If the state borrows from the population, then there is a "crowding out effect" that reduces investment. The essence of the latter is that by placing loans on the money market, the government enters into competition with private entrepreneurs for financial resources. The increased demand for cash leads to an increase in interest rates and a subsequent decrease in investment. Government spending, which is usually non-productive, crowds out private investment in production.
Public debt is the sum of accumulated budget deficits of previous years. A government loan is significantly different from a private loan. The latter is used, as a rule, for industrial purposes. Interest payments on private loans are made at the expense of income growth. The state loan used to cover the budget deficit is not associated in its predominant part with production activities. The state pays off its debts and pays interest on the liabilities from taxes.
Taking into account the placement, a distinction is made between internal and external public debt. Domestic debt (debt to one's population) is usually formed through loans issued by issuing and selling government securities (GS).
Consequences of the accumulation of domestic public debt:
1. Leads to a redistribution of income among the population. All citizens of the country, as taxpayers, pay interest on the state debt, but this interest is received in their income only by the creditors of the state, and these are, as a rule, the richest strata of the population.
2. It is possible to shift the debt burden onto future generations. If government loans are spent on current consumption, then the increase in debt and interest on it will lead to a limitation of consumption in the future. It is important that the state debt goes to investments and modernization of production, the income from which would make it possible to pay off debts in the future.
3. Rapidly rising interest rates make it difficult to reduce the budget deficit, because they turn into new state budget expenditures, new loans to pay interest on old debts.
External public debt is paid off by transferring goods to another country. In order to pay off the external debt, the country must reduce imports and increase the export of goods, while the proceeds from exports go not for development purposes, but for debt repayment, which slows down the growth rate and lowers the standard of living.
If loans abroad are made for consumer purposes, then the debt burden is shifted onto descendants - as is the case with domestic debt.
6. Fiscal policy of the state. Fiscal (fiscal) policy is a system of regulation associated with government spending and taxes. At present, fiscal policy is the main means of regulating the economies of developed countries. Policy Objectives:
Smoothing fluctuations in the economic cycle;
Stabilization of economic growth rates;
Achieving the level of natural employment;
Moderate inflation rates.
It is necessary to distinguish between passive and active fiscal policy, the latter reflects the Keynesian approach to macroeconomic regulation. Within the framework of the Keynesian approach, fiscal policy is considered as the most effective instrument of government influence on economic growth, employment and price dynamics (see topic 14).
The basis of the fiscal policy of the state is the following: - Reducing taxes and increasing government spending increases aggregate demand and, consequently, leads to an increase in the volume of output, an increase in income, a decrease in unemployment; and vice versa: - an increase in taxes and a decrease in government spending, leads to a decrease in aggregate demand, output, income, employment and inflation.
Fiscal policy affects the national economy through commodity markets. Government spending increases the volume of aggregate demand (AD), joining spending on consumption (C) and investment (I). The impact of government spending on output is the same in magnitude and direction as the impact of investment. By increasing the volume of government purchases, the government is injecting (injecting) into the national economy.
As for taxes, unlike government spending, they reduce consumption and savings, i.e. are revenue leaks. Consequently, the direction of the impact of government spending and taxes on the value of national production and income is exactly the opposite.
Fiscal policy analysis involves combining the multiplier effects of fiscal policy.
Suppose an equal increase in government spending and taxes. Then, under the influence of an increase in government spending, aggregate demand increases, and under the influence of an increase in taxes, it will decrease. At the same time, since the multiplier of government spending is stronger than the tax multiplier, the final, total result will be an increase in output equal to an increase in taxes and government spending.
A fiscal policy that provides for an equal increase in taxes and government spending leads to a balanced budget effect, the essence of which is that an equal change in government spending and taxes leads to a change in equilibrium output by the same amount. In other words, the balanced budget multiplier is 1.
Distinguish between discretionary and automatic types of fiscal policy.
Rice. 30. Fiscal policy of the state
Non-discretionary fiscal policy is built on automatic stabilizers that automatically mitigate fluctuations in GNP by decreasing the multiplier. The most important automatic stabilizers are taxes, unemployment benefits, income indexation, and agricultural subsidies.
If there is a recession in the economy, i.e. personal incomes and incomes of enterprises decrease, then taxes also automatically decrease, which, other things being equal, mitigates the consequences of a decrease in aggregate demand, helps to stabilize output. At the same time, the transition to a lower tax rate (due to a drop in income) increases the value of the multiplier and helps the economy to get out of the recession. However, as a result of tax cuts, a budget deficit arises or increases.
During booms and inflation, incomes rise, tax rates rise, and the multiplier value decreases, which contributes to a reduction in aggregate demand and output and a decline in prices. Thus, the ability of the tax system to reduce tax withdrawals during a downturn and increase them during inflation is a powerful automatic stabilizer of the economy.
Unemployment benefits have a similar impact on the economy. When employment is high, the employment fund rises and puts constraining pressure on total spending; during periods of low employment, the fund's resources are spent heavily, supporting consumption and cushioning the decline in production. Thus, the stabilizers work in both directions - both upward and downward.
However, built-in stabilizers cannot completely solve all macroeconomic problems. They mitigate fluctuations in the cycle, but cannot eliminate their cause, so automatic fiscal policy is complemented by discretionary ones, which lead to an increase in budget deficits during periods of recession and budget surpluses during inflation.
Discretionary fiscal policy is carried out at the discretion of the government, based on its decisions, and is implemented through government procurement of goods, government transfers and taxes. This leads to an increase in aggregate costs in the market and stimulates the growth of aggregate demand, and, consequently, the production of GNP. Accordingly, a decrease in government spending will mean a decrease in total spending and the equilibrium level of GNP.
Discretionary fiscal policy includes:
· Implementation of employment programs aimed at providing the unemployed with work at the expense of the state budget;
· Implementation of social programs that allow to stabilize economic development when costs are reduced and the need is aggravated;
· Change in the volume of tax exemptions through the introduction or abolition of taxes or changes in tax rates. By changing the tax rate, the government can keep revenues from falling during a downturn, or vice versa, reduce disposable income during a boom. The change in the tax rate can also be used to influence inflation.
Depending on the stage of the economic cycle, discretionary fiscal policy can be stimulating (expansionary), neutral or constraining (restrictive). Expansionary fiscal policy is aimed at reviving economic activity in the country, increasing aggregate demand. It is carried out on the downward part of the wave of the economic cycle, by reducing tax rates, providing tax incentives, and increasing government spending.
Literature
Economic theory course. General foundations of economic theory, microeconomics, macroeconomics, economy in transition: Textbook / Head of the team of authors and scientific editor A.V. Sidorovich. - M .: Moscow State University, "DIS", 2007. - Ch. 25, 36
McConnell C.R., Bruce S.L. Economics. - M .: INFRA-M, 2005. - Vol. 1, ch. 14, 20.
Economic theory: Textbook / Under total. ed. acad. IN AND. Vidyapina, A.I. Dobrynina, G.P. Zhuravleva, L.S. Tarasevich - M .: INFRA-M, 2000. - Ch. 27.
Self-test questions
1. What is finance, the state budget?
2. What are taxes?
3. What is the regulatory role of taxes?
4. Using the A. Laffer curve, show the value of establishing the optimal income tax rate.
5. What is government spending. Describe them.
6. What is the state budget deficit?
7. What are the ways to cover the state budget deficit? Describe them.
8. How can fiscal policy affect the change in GNP?
10. How can automatic stabilizers affect the equilibrium GNP?
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