Fiscal instruments of impact on the economic development of countries

Abstract

Іntroduction. A common measure to combat the crisis is the provision of targeted tax benefits for businesses, a temporary reduction in the tax burden on wages. However, excessive redistri­bution of GDP through the public finance system can hold back economic growth.

Problem. It is important, depending on the socio-economic model and institutional features, to find the optimal configuration of fiscal policy to increase business activity, increase endogenous human potential.

The aim of the article is to assess the impact of fiscal instruments on economic development and substantiate proposals to increase the effectiveness of fiscal policy.

Methods. In the process of research the system approach, methods of analysis and synthesis, scientific abstraction are used. Economic and mathematical methods have also been used to quantify the impact of fiscal indicators on economic growth.

Results. The impact of tax burden, public expenditures, fiscal deficit on economic growth in 23 European countries during 2012–2021 has been assessed. The structure of taxation of the European Union member states has been studied. The peculiarities of the implementation of fiscal policy in the conditions of the COVID-19 pandemic are determined. Measures to increase the effectiveness of state fiscal policy in the medium term are justified.

Conclusions. Fiscal policy has a significant impact on the processes of economic and social development. In the context of the COVID-19 recession, EU countries actively used fiscal incentives to support the economy and household incomes. These measures simultaneously included increased expenditures and reduced taxes with the provision of targeted tax benefits. Over the last 10 years, the relationship between the main fiscal indicators for the 23 EU member states has been negatively correlated with economic growth indicators. This necessitates a gradual reduction in the share of public expenditure in GDP, the formation and implementation of a balanced budget that ensures macroeconomic stability. An important factor in ensuring economic development is the structure of taxation.