1. Fiscal policy of the state.
The fiscal policy of the state involves the use of the government's ability to levy taxes and spend state budget funds to regulate the level of business activity and solve various social problems.
The main levers of the state's fiscal policy are changes in tax rates, the 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 legislative bodies of the country, since it is they who control taxation and the spending of state budget funds.
In economic theory, there are different points of view on the methods of conducting the fiscal policy of the state.
Supporters of the Keynesian direction traditionally focus on the creation of effective aggregate demand as a stimulus for economic development. Therefore, they consider tax cuts as the main factor in the growth of aggregate demand and, accordingly, the growth of real output. At the same time, in the short term, there is a reduction in budget revenues, resulting in the formation or increase in the budget deficit.
Proponents of the theory of "supply-side economics" consider a decrease in tax rates as a factor in increasing aggregate supply.
1.1 Discretionary fiscal policy.
Discretionary fiscal policy is based on the decisions of the government, 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 business cycle may be restraining or stimulating (deficient).
Contractionary 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 compared to its potential level. The mechanism for implementing the contractionary policy is to increase net taxes (the difference between the government's tax revenue and government transfer payments) or increase them, combined with a decrease in government spending (purchases and orders), which will offset the expected recovery in aggregate demand in the private sector of the economy.
In conditions of inflation caused by excess demand (inflationary growth), contractionary discretionary fiscal policy consists of:
2. increase in taxes;
3. Combining government spending cuts with increasing taxation (taking into account the fact that the multiplier effect of the reduction state taxes more than the multiplier effect of tax increases).
Stimulating (deficit) fiscal policy implemented during recession social production when unemployment is significant, through measures aimed at lowering net taxes or a combination of lowering net taxes and increasing government spending.
During a downturn, stimulating discretionary fiscal policy consists of:
1. reducing government spending;
2. tax cuts;
3. combinations of government spending growth with tax cuts (assuming that the multiplier effect of an increase in government spending is greater than the multiplier effect of tax cuts).
The stabilization impact of taxes and government spending on economic development 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 conceptual model of state regulation used.
1.2 Non-discretionary fiscal policy: built-in stabilizers.
By built-in stabilizers, we mean certain features in government revenues that play a compensatory role in the economy, regardless of the applied government decisions. 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 revenues rise when national income rises and fall when national income falls.
Transfer payments also play a certain stabilizing role. Some of them, such as child benefits and medical treatment payments, do not depend on fluctuations in national income. But most of the transfer (unemployment benefits, additional payments, and others) change inversely with fluctuations in the business cycle: during the economic recovery, payments of this kind are significantly reduced and increase during the period of production.
Somewhat necessary changes in relative levels government spending and taxes are entered automatically. This so-called automatic or built-in stability is not included in the consideration of discretionary fiscal policy. This happened because we assumed the existence of a lump-sum tax, which provides for the withdrawal of the same tax amount at different increases in NNP. Built-in stability comes from the fact that in reality our tax system provides for the removal of such a net tax ( net tax is equal to the total tax, minus transfer payments and subsidies), which varies in proportion to the value of NNP. Almost all taxes will increase tax revenue as NNP rises. In particular, the individual approach income tax has progressive rates and, as the NNP rises, gives a more than proportional increase in tax revenues. Moreover, as NNP rises and the exchange of purchases of goods and services grows, revenues from corporate income tax, turnover tax and excises will increase. And payroll taxes increase as new jobs are created in the course of the economic recovery. On the contrary, if NNP falls, tax revenues from all these sources will fall. Transfer payments (or "negative taxes") have exactly the opposite behavior.
Automatic, or built-in, stabilizers.
If tax revenue fluctuates in the same direction as NNP, then deficits, which tend to automatically appear during downturns, help to overcome the downturn. On the contrary, budgetary surpluses, which tend to show up automatically during economic recovery will contribute to overcoming possible inflation.
The figure is a good illustration of how the tax system enhances built-in stability. Government spending (G) in this scheme is assumed to be given and independent of NNP; spending is approved by Congress at constant, fixed levels. But Congress does not determine the amount of tax revenue, rather, it determines the size of tax rates. Tax revenues then fluctuate in the same direction as the level of NNP that the economy reaches. A direct relationship between tax revenues and NNP is recorded in the rising T line.
Economic importance This direct relationship between tax revenues and NNP is especially important when we remember two things. First, taxes represent a drain or loss of potential purchasing power in economics. Second, it is desirable to increase the volume of such leakages (seizures) during periods when the economy is moving towards inflation, and, on the contrary, the amount of purchasing power withdrawals should be minimized during a period of slowing growth. In other words, the tax systems shown 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. An embedded stabilizer is any measure that tends to increase the government budget deficit (or reduce its surplus) during a recession and increase its surplus (or decrease its deficit) during an inflation period, without the need for any special action by policy makers. As NNP rises during a prosperous period, tax revenues rise and—because they are leakages—contain economic recovery. When NNP declines, during a recession, tax revenues are automatically reduced, and this reduction cushions the economic downturn. That is, with falling NNP, tax revenue also falls and pushes the state budget from a budget surplus to a deficit. Using the notation in the figure, low level national product NNP 3 will automatically cause the appearance of a stimulating budget deficit; a high inflationary level of NNP product 2 will automatically create a contractionary fiscal surplus.
It is clear from the figure that if tax revenue changes vigorously following changes 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 larger. Conversely, if tax revenues change very little with changes in NNP, the slope will be flat 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 undesirable changes in the equilibrium NOR. All stabilizers do is limit the scope or depth of economic fluctuations. Therefore, Keynesian economists agree that correcting inflation or a recession of any size requires discretionary fiscal action by Congress - that is, changing tax rates, tax structure and the amount of expenses.
2. Government spending and GDP.
The state budget is 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 revenue and expenditure parts, which should be balanced in the planned perspective.
The state budget is compiled by the government and approved by the highest legislative bodies. That. in the hands of the state there are significant financial instruments impact on economic processes. As a rule, these are government purchases, subsidies, 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 spending includes:
1. social payments;
2. investments in the economy, subsidies, subsidies (injections);
3. expenses for the maintenance of the administrative apparatus;
4. spending on defense and maintenance of internal order;
5. provision of credit to domestic and external actors management;
6. repayment of debt on a loan;
7. expenses for science, culture, healthcare, education, etc.
Discretionary fiscal policy is understood as the conscious regulation by the state of the level of taxation and public spending in order to influence the real volume of national production, employment, and inflation.
To analyze this impact, we use the figure:
"The Impact of Government Spending on National Output and Changes in Macroeconomic Equilibrium".
Let us make some assumptions that simplify the analysis of the impact of fiscal policy on aggregate demand, namely: we 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 expenditure (consumption + investment, or C + I). Introduction to the economic analysis of government spending (G) shifts the graph of total spending (C + I) up and causes an increase in the gross national product. The point of macroeconomic equilibrium shifts up the line in the bisector.
Government spending has an impact on aggregate demand similar to investment and, like investment, has a multiplier effect. The government spending multiplier shows how GNP changes as a result of changes in government spending:
K g \u003d ΔGNP / ΔG,
Where G - government spending;
K g is the government spending multiplier.
The government spending multiplier can also be quantified in terms of such economic categories, as marginal propensity to save (MPS) and marginal propensity to consume (MPC):
Kg=1/1-MPC=1/MPS.
Thus, ΔGNP \u003d 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 amount of total costs in the market increases accordingly, thereby stimulating aggregate demand and growth in national production, the gross national product. A reduction in government spending entails, therefore, a reduction in the gross national product.
In turn, the introduction of additional expenses or an increase in the rates of existing ones leads to a decrease in disposable income (income after taxes) of taxpayers, which is reflected in the total amount of total expenses (they decrease).
3. Taxation. Net tax multiplier.
Fiscal policy affects only demand, that is, the amount of aggregate spending and aggregate demand. But economists have also recognized that fiscal policy—especially tax changes—can change aggregate supply and therefore influence the changes that fiscal policy can bring about in the price level-real production ratio.
Proponents of the theory of "supply-side economics" consider a decrease in tax rates as a factor in increasing aggregate supply. They believe that reducing the tax burden leads to an increase in income:
1. population, and, consequently, to the growth of savings
2. business, and, consequently, 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 ensures an increase in tax revenues to the budget by expanding tax base(according to the "Laffer effect"). These causal relationships are illustrated in the figure.
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Initially, the equilibrium within national economy(aggregate demand AD 1 , aggregate supply AS 1) was achieved with production volume Q 1 and price level P 1 . The reduction in tax rates on personal income led to an increase in 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 reduction in tax rates on the income of entrepreneurs led to an increase in aggregate supply from AS 1 to AS 2 . A new equilibrium has been reached within the national economy (aggregate demand AD 2 , aggregate supply AS 2) with output Q 3 and price level P 3 .
It should be noted that the impact of taxes on demand is faster. In the short run, tax cuts unequivocally lead to an increase in aggregate demand and a decrease in tax revenues to the budget, although in the long run, tax revenues may increase as a result of the achieved economic growth. In other words, the cause-and-effect relationships between fiscal policy and aggregate supply are designed for a long-term effect, and the chain of these relationships is long.
Let us now consider the effect of taxes on national production and GNP. To simplify the analysis, let us assume that the government introduces a lump-sum tax, the amount of which does not change at any value of GNP (a tax of constant value). The introduction of this tax will lead to a decrease in the disposable income of taxpayers (income after tax), therefore, their expenses will also be reduced. This, in turn, will affect the entire amount of expenses: it will decrease.
With constant I and G, the schedule of total expenditures (C + I + G) will shift down and cause a decrease in GNP. The macroeconomic equilibrium point will move down the 45-degree line, as shown in Figure
The opposite picture will emerge with tax cuts.
At the same time, the impact of taxes on the volume of GNP is specific compared to the impact of investment and government spending. The fact is that disposable income is used not only for consumption, but also for savings. Therefore, a decrease in disposable income reduces not only consumption, but also savings.
What will be the reduction in direct consumption? 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. (Similarly, multiplying the amount of the tax increment by the MPS will show the reduction in savings due to the additional tax, or C=T*MPS.)
The effects of taxes, like investment and government spending, have a multiplier effect. But the investment multiplier is less than the multiplier of government spending and investment, because, for example, when taxes are cut, consumption increases only partially (part of disposable income goes to increase savings), while each unit of increase in government spending or investment has a direct impact on the value of GNP.
The tax multiplier is equal to the government spending multiplier multiplied by the MPC.
K t =1 / 1-MPC*MPC=MPC / MPS.
The amount of taxes depends on the amount of income. Therefore, during a period of rapid GNP growth (during a boom), tax revenues automatically increase (with a progressive tax rate and also due to an expansion of the tax base), which reduces the purchasing power of the population and curbs economic growth. Conversely, during a period of economic recession, the amount of income withdrawal decreases, i.e. there is a gradual increase in purchasing power, which generates effective demand and restrains the decline. In other words, progressive taxation during a period of inflationary growth leads to a loss of purchasing power, and vice versa, during a period of economic slowdown, it provides a minimal loss of purchasing power.
4. Features of the fiscal policy of the Republic of Belarus.
4.1 Reforming the budget system in the Republic of Belarus
Over the past years, there has been significant progress in building a budget system that meets modern requirements. In fact, it has undergone a transformation from administrative-command mechanisms for the redistribution of all public resources to a combination built on market principles tax system And budget spending, providing mainly the functioning state system social protection, budget organizations And public sector economy. Direct subsidies to the non-state sector play an insignificant role (it should, however, be taken into account that this is still 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.
The new budget classification formed the basis new edition Law of the Republic of Belarus "On the budget system in the Republic of Belarus", which made significant changes to the terms and definitions of budget legislation, specified the principles of building the budget system and organization budget process. The formation of the treasury budget execution system, which has not yet been completed, 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 budget process are still so great that it is still impossible to talk about the completion of the formation of the basis of the budget system, which can be developed and improved in subsequent years. We have yet to create such a foundation. Fundamental problems characterizing the current state of the budget system (excluding the above tax problems) is as follows:
The formation of the state budget continues to be carried out, by and large, according to the “from what has been achieved” method. Interaction with departments, regions and the legislature, which determines budget parameters, is in the nature of subjective bargaining, not based on an assessment of the effectiveness of budget expenditures. This bargaining (instead of an objective analysis economic feasibility) ultimately determines the choice and volume of financed and refinanced obligations of the state. Despite significant progress in improving the budget classification, authorities, especially at the regional level, do not yet follow the new rules, which leads to both poor quality of budget planning and low transparency of budgets at all levels.
The quality of forecasting the main macroeconomic indicators (GDP, inflation growth rates, exchange rate etc.), underlying the budget, 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 operate with a low degree of efficiency. This applies to interbudgetary relations, and to the entire budget process, including the stages of formation budget policy, budget execution, accounting and control, transparency of budgets and procedures for making budget decisions, debt and asset management.
The adoption of a new version of the Law of the Republic of Belarus "On the budget system in the Republic of Belarus" did not solve all the urgent problems of improving the efficiency of the budget process, especially in terms of interbudgetary relations.
To this day, targeted budget funds and linked lending mechanisms are widely used as budget financing instruments. These instruments tend to be highly inefficient, either leading to excess spending not expressly provided for in annual budget laws, or to the loss of accountability mechanisms at a lower level and corresponding financial responsibility at a higher level. An unreasonably significant role in the system public finance extra-budgetary funds continue to play, which reinforces the non-transparent and uncontrolled nature of the redistribution of state resources.
Until now, state revenues and expenditures in national and foreign currencies are planned and accounted for separately. At the same time, the procedure for drawing up and implementing a plan for foreign exchange income and budget expenditures is not regulated by law.
While the budget execution process has improved markedly in Lately thanks to the formation 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-annual itemized 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 hinder the efficient use of funds. The treasury system only to a small extent affects the execution of local budgets. The procedures for the intra-annual redistribution of resources and the use of additional income are far from perfect. Can't get away from savings accounts payable for individual budget lines.
The quality of budgetary control, carried out both by the control and audit bodies of the Ministry of Finance, and even more so by departmental control services, remains clearly insufficient. Since, in accordance with the current legal acts the main attention is drawn to the compliance of budget execution with the indicators laid down in the law, i.e. primarily for the intended use budget funds, then there are not enough material or professional resources to assess the actual effectiveness of public spending. To the greatest extent, these problems are inherent in the regional level of the budget system.
Public debt management continues to be driven largely by budgetary needs and the need for financial support for unprofitable industries, without due regard to the impact of the public debt market on savings and private investment, and without sufficient attention to the performance of various debt instruments. Debt management is practically not associated with the management of public assets. In the management of state property, there is no comprehensiveness and approaches based on the evaluation of efficiency.
All these problems require a serious reform of the budget legislation with a long-term orientation towards the preparation and adoption, by analogy with the Russian Federation, of the Budget Code of the Republic of Belarus.
In line with common practice effective organization budget process, the main objectives of this reform are:
Ensuring the stability and predictability of the budget system based on the creation of conditions for full and sustainable implementation financial obligations 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 extra-budgetary and target 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 asset management;
Reform of interbudgetary relations on the basis of a clearer delineation of expenditure and tax powers between the republican and local budgets and 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 on the current fiscal policy.
At the first stage, an inventory and assessment of the effectiveness of budget expenditures and obligations, including public targeted programs to make the necessary corrections to the current budget classification and rules for its use. The inventory should affect all categories of expenditures and budget obligations, all levels of budgetary funds management. 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 concentrate financial resources on the performance of the main functions of the state - to increase budget spending on social programs, health care, culture, the judiciary, law enforcement and defense.
The formation of budgets should be built solely on the basis of an assessment of the effectiveness of expenditures (as opposed to the method "from what has been achieved"), in full accordance with the powers of various levels of government. Planning of budgetary 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 the choice of a portfolio of financed obligations, but the revision of the structure of expenditures arising from priorities public policy, 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 the establishment of monthly spending limits, prompt selection of sources for financing the deficit, and clarification of procedures for using additional budget revenues.
Improving procedures budget accounting and control includes measures to develop methodological work and put into practice all the principles of budget classification in in full at all levels of the budget system. It is also necessary to exclude the intersection control functions in the system of control and audit bodies.
As soon as possible, the formation of the treasury system of budget execution at the republican and local levels should be completed.
In order to increase the transparency of budgets and budgetary procedures, a mandatory publication requirement should be introduced. budget reporting for all sections of the budget classification and at all levels of the budget system, providing a methodological basis for this. Procedures for public procurement of goods and services should also become as open as possible. Consolidation in the budgets of all levels of expenditures of extra-budgetary and target budget funds 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 special-purpose budget funds built on deductions from proceeds from the sale of goods and services, with the transfer of the corresponding costs to consolidated budget on a common 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 projected macroeconomic trends, as well as from the need to develop domestic financial markets.
Reforming the budgetary and tax systems is a prerequisite and the basis for an effective fiscal policy, which, nevertheless, has its own logic, principles and methods of development.
Belarus, like most countries of the post-Soviet space, has chosen the path of gradual reforms. The initial price liberalization (1992-1993) in the context of a pro-inflationary monetary policy aimed at preventing a fall in GDP created the conditions for a rapid rise in prices. Average monthly growth rate CPI in 1992-1994 was over 30%. Relative stabilization (1995-2000) and tightening of the monetary policy showed the weakness of the unreformed real sector. Since the autumn of 2000, GDP growth has been chosen as a priority development goal, stimulated by active credit emission to the selected "points of growth" - APK and housing construction. The President has set a goal for the government to reach the output of 1990. In 1997 - 2001 Belarus demonstrates high rates of GDP growth, which has increased by 40% over the 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, and the sinking of fixed and working capital of enterprises. Nevertheless, the inefficiency of the chosen model became apparent already in 2001, when the growth of quantitative indicators began to be accompanied by a deterioration in quality ones. Profitability and solvency fell, accounts payable and accounts receivable and the number of unprofitable enterprises.
GDP growth took place against the backdrop of a decline in real incomes of the population. In 1997-1998, the salary was 40 USD, and in 1999. number of people earning less than living wage, was already 50%. In 2000, as a result of a campaign to increase wages on the eve of the presidential elections, the accrued average monthly wages reached the level of 1995. 30% of Belarusians now live below the poverty line. Pensioners receive 40 USD pension. Families with two or more children automatically fall into the category of needy.
Belarus has become an outsider in the implementation of market reforms, having the worst indicators of market transformation and 148th place in the ranking economic freedom. The volume of attracted FDI is 123 USD per person, of which a significant part is the Belarusian-Russian construction of the gas pipeline.
Thus, the declared growth of gross indicators has not justified the hopes of the Belarusian people. Repressive macroeconomic policies and an opaque legal environment contribute to the flight of capital from the country, the massive retreat of businesses into the shadows, and the lack of private investment and savings.
Therefore, while declaring a course to attract foreign investment, Belarus should also 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.
Introduction
1. Fiscal policy as a system of state regulation of the economy
1.1 The essence of the fiscal policy of the state
1.2 Principles and mechanisms of the impact of fiscal policy on the functioning of the economy
1.3 Fiscal policy instruments
2. Features of fiscal policy in the Russian Federation
2.1 The need to reform fiscal policy
2.2 Ways and methods to improve fiscal policy
Conclusion
Bibliographic list
Introduction
I think the topic of this coursework is very relevant today. Fiscal policy is one of the main instruments of state regulation of the economy and, in the context of the ongoing economic crisis in Russia, plays a significant role in the restoration of the national economy.
The difficult situation of the economy predetermines fiscal policy aimed, on the one hand, at stopping the decline in production and stimulating production (for example, in the form of separate tax breaks for producers), at mobilizing financial resources for their efficient investment in certain sectors of the economy, and on the other hand, to contain all social programs, reduce defense spending, etc. Accordingly, when the economy transitions to another state, the directions of fiscal policy change.
Recently, there has been a tendency to strengthen the role of the government in regulating the national economy through the financial system, namely, government spending on social security programs, maintaining an average income level, health care, education, etc.
Meanwhile, since the beginning of economic reforms in Russia, the government has taken the lead in introducing extremely high taxation on firms' income, which has had a negative impact on the state of the national economy and the prospects for its recovery. It is no coincidence that the response is the active development shadow economy. As a result, the Government of the Russian Federation is not able to collect even half of the envisaged revenues into the revenue side of the budget.
In this regard, the fiscal policy of the Government of the Russian Federation needs to be further reformed both in the field of taxation and in the field of public spending.
So, the purpose of this work is a comprehensive consideration of the fiscal policy of the state as a method of state regulation of the economy. Firstly, I will reveal the very concept of fiscal policy, highlight its main components, outline the principles, mechanisms and tools for influencing the economic system of society. Secondly, I will analyze the current fiscal policy in the Russian Federation: highlight the objective reasons for the need to reform the existing fiscal policy, the transformations currently being carried out by the government of the Russian Federation, as well as possible ways for further improvements in the field of fiscal policy.
In preparation for writing this work, I studied a wide range of literary sources, with complete list which can be found in the final part of the course project. However, I would like to note the literature, which, in my opinion, contains the most detailed and qualified information on the features of fiscal policy in Russia. These are: the article "Implementation of fiscal policy" / Problems of Forecasting, No. 2, 2003, pp. 45-57, which outlines the main directions of modern fiscal policy in the Russian Federation, and also highlights the processes of its reform; the article "The main guidelines for fiscal policy" / Finance, No. 8, 2002, pp. 50-56, which provides possible ways to optimize the current fiscal policy, points out the goals that the government of the Russian Federation should pursue in the course of the ongoing reforms, as well as their possible consequences; article "Is the current tax policy effective" / Finance, No. 10, 2002, pp. 24-32, which examines the features of modern tax policy in Russia as one of the main components of fiscal policy: the processes of reforming the taxation system, changes in the economy occurring under the influence of these processes, as well as methods for further improvement, increasing the efficiency of the tax system in the Russian Federation.
1. Phirock politics as a system Gstate regulation of the economy
1.1 The essence of the fiscal policy of the state
Through fiscal policy, the state regulates the system of measures in the field of government procurement of goods and services, as well as taxation. The word "fiscal" is of Latin origin and in translation means official. In Russia, in the era of Peter I, fiscals were called officials who supervised the collection of taxes and financial affairs. In modern economic literature, fiscal policy is associated with government regulation of government spending and taxation. Government spending on the purchase of goods and services significantly affect the size of the gross and net domestic product. In our country, such purchases were usually called state orders, which were financed from the state budget. In fact, fiscal policy is the main lever by which the state can influence the economy. Therefore, it is necessary to consider how the state, through this policy, affects the achievement of an equilibrium volume of national production, economic stability and full time.
To understand the general principles of state regulation, it is necessary to clearly distinguish two components of fiscal policy.
This is government spending on the purchase of goods and services, with which you can increase or decrease total spending, and thereby affect the volume of national production. Government spending includes all budget allocations directed to the construction of roads, schools, hospitals, cultural institutions, the implementation of environmental and energy programs and other public needs and needs.
This includes defense spending, foreign trade purchases, the purchase of agricultural products necessary for the population, etc. Such expenditures and purchases can be called state-public, because the consumer of goods and services is society as a whole, represented by the state.
Government spending directed to the regulation of the sustainable functioning of the market economy. Such spending contributes to an increase or decrease in domestic output (NDP) during periods of its recession or recovery. Government spending not only directly, but also through the multiplier effect affect the volume of domestic production, causing it to increase or decrease.
The state influences the volume of domestic production through its tax policy. Obviously, the higher the taxes, the less income the population will have, which means the less they will buy and save. Therefore, a reasonable tax policy involves a comprehensive consideration of those factors that can stimulate or hinder economic development and the welfare of society.
At first glance, it seems that high taxes, contributing to an increase in government revenue, will work for society and the country's budget. But upon closer examination, the opposite is revealed: neither the enterprise nor the worker finds it profitable to work with excessively high taxes, as we all could see from the example of our economic reform. However, low tax rates will significantly undermine the state budget and its most important items, such as the cost of maintaining budgetary organizations and social and cultural events. That is why, when pursuing a cautious and reasonable tax policy, it is necessary, as they say, to measure seven times and cut off once.
Government spending on the purchase of goods and services usually makes up a significant portion of the budget. In our country, they acted in the form of state orders to enterprises. Such an order is also practiced in countries with a developed market structure. So, in the USA and England, a fifth of GDP is acquired by the state, and, as a rule, firms and corporations always strive to receive an order from the state, since this provides them with a guaranteed sales market, credit and tax benefits, and eliminates the risk of non-payment. Ruzavin G.I. Fundamentals of the Market Economy: Textbook for High Schools - M.: Banks and Exchanges, UNITI, 2001. - p. 273
The government increases its purchases during periods of recession and crisis and reduces during periods of recovery and inflation in order to maintain the stability of domestic 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 macro-economic functions of the state.
The most important role of public spending is played in financing the social and cultural programs of the state, ensuring its defense, maintaining the administrative apparatus and law enforcement agencies, as well as investing in the development of the public sector of industry. At the same time, a huge deficit of the state budget has developed in our country, which leads to a financial imbalance in the national economy and therefore requires especially careful planning of expenditures, achieving maximum efficiency. A significant role in replenishing the budget can be played not so much by a reasonable tax policy as by measures to tighten tax discipline. This applies primarily to cooperatives, rental and joint ventures and especially commercial structures, which often evade paying taxes by finding all sorts of loopholes in laws and regulations. Moreover, publications appear in the press that teach people to circumvent taxation laws. All this indicates a very low level of organization of our fiscal policy, both in terms of public spending and taxation. In the latter case, on the one hand, very high taxes on profits and value added are observed, which makes it impossible to expand the production of consumer goods, and on the other hand, the state loses a lot from non-payment of those completely legal and justified taxes, which many commercial structures evade, not to mention the direct embezzlement of billions of dollars from banks on false documents and the assistance of corrupt officials.
Apparently, many shortcomings in our tax system are explained by the fact that in our country, in fact, it has only just begun to take shape. Many laws and regulations turned out to be imperfect and had to be clarified and supplemented, especially after the collapse Soviet Union; up-parat tax office turned out to be ill-prepared to deal with violators of the laws. The successful implementation of tax policy is also hampered by old views and psychological attitudes, according to which taxes were considered a typical bourgeois tool of management. It is not superfluous to recall that in the 1960s we issued a law on the gradual abolition of all taxes, which, of course, was never introduced, since it is clear to everyone that no state can exist without taxes.
Taxes are levied on income (property) of individuals and legal entities. As a normative form imposed on income, taxes are characterized by the obligation and urgency of payment. Therefore, any tax evasion and untimely payment of them lead to appropriate legal and administrative-financial sanctions.
Fundamentally new in our legislation is the introduction of income tax, which is more in line with the structure of the market economy than previously existing payments, in those features that went to the ministries-to you. Although income taxes are still high, however, legislatures are gradually beginning to realize that they must be lowered, and gradually they are actually beginning to be revised. Along with this, various benefits are provided to enterprises, for example, when conducting research and development work and mastering new and high technologies.
For income tax there is a scale of taxation depending on the form of ownership; various benefits are also provided for different categories of citizens; too high taxes on individual labor activity have been canceled, although there are still unjustified rates and restrictions.
Finally, a completely new thing for us is the creation of a tax inspectorate, which is designed to strictly control the process of taxation in the conditions of the formation of various forms of ownership and carefully monitor the payment of taxes by collective and private enterprises, as well as individual citizens.
1.2 Principles and mechanisms of the impact of fiscal policy on the functioning of the economy
With the help of fiscal policy, the state can directly influence the development of the economy, achieving its sustainable growth, price stability and full employment of the able-bodied population.
Such a policy consists in foreseeing a decline in production and an increase in unemployment, as well as an increase in inflationary processes in the economy in time, and to influence them accordingly. With the coming decline in production, the government increases government spending and cuts taxes in order to increase aggregate spending and investment. Thus, it contributes to the rise of production and employment. On the contrary, when inflation occurs, government spending decreases and taxes increase.
All activities of this kind state regulation economy, received the name of discretionary policy. Together with monetary policy it plays a crucial role in the leadership of the state macroeconomics, ie. phenomena related to employment, expenditures and incomes of the population, price stability and sustainable development of production.
However, macroregulation is not limited only to the direct actions of the state in the face of its governing bodies. If there were no other regulators, then we would only have to wait for the government representatives to notice the negative phenomena in the economy and take measures to eliminate them. And the implementation of such measures will require a certain amount of time until they are precisely formulated, approved by the legislature, and then, finally, implemented.
Fortunately, in a market economy there are certain mechanisms of self-organization and self-regulation that come into effect immediately, as soon as negative processes in the economy are revealed. They are called built-in stabilizers. The principle of self-regulation that underlies these stabilizers is similar to the principle on which an autopilot or refrigerator thermostat is built. When the autopilot is turned on, it maintains the aircraft's heading automatically, based on incoming signals. feedback. Any deviation from given course thanks to such signals, it will be corrected by the control device. Economic stabilizers work in a similar way, thanks to which automatic changes in tax revenues are carried out; payment of social benefits, in particular for unemployment; various state programs of assistance to the population, etc.
How does self-regulation, or automatic change, take place in tax revenues? IN economic system a progressive taxation system is built in, which determines the tax depending on income. With an increase in income, tax rates progressively increase, which are approved by the government in advance. With an increase or decrease in income, taxes automatically increase or decrease without any intervention by the government and its governing and control bodies. Such a built-in stabilization system of tax collection reacts quite sensitively to changes in the economic situation: during recessions and depressions, when the incomes of the population and enterprises are falling, tax revenues automatically decrease as well. Conversely, during inflation and boom periods, nominal income rises and therefore taxes automatically rise.
In the economic literature on this issue, there are different points of view. A hundred years ago, many economists spoke out for the stability of tax collections, because, in their opinion, it contributes to the stability of the economic situation of society. At present, there are many economists who hold the opposite point of view and even declare that the objective principles underlying the built-in stabilizers _ should be preferred to incompetent government intervention, which is often guided by subjective opinions, inclinations and preferences. At the same time, there is also an opinion that one cannot fully rely on automatic stabilizers, since in certain situations they may not respond adequately to the latter, and therefore need to be regulated by the state.
Payments of social assistance benefits to the unemployed, the poor, families with many children, 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 people in need state aid businesses and their employees do.
Despite the significant role of built-in stabilizers, they cannot completely overcome any fluctuations in the economy. Just as a real pilot comes to the aid of an autopilot in difficult situations, so with significant fluctuations in the economic system, more powerful state regulators are included in the form of discretionary fiscal, as well as monetary policy.
Let us briefly consider the main elements of discretionary policy. The main element is the change in the programs of social work. Such works were deployed during the Great Depression of the 30s in order to combat unemployment by increasing jobs. Since, however, such projects were drawn up hastily and focused on keeping people busy with any kind of work, for example, building roads without the necessary number of machines and mechanisms, or even raking dry leaves in parks, the economic efficiency of these programs was very insignificant. In addition, it should be borne in mind that currently developed countries recessions in production are much shorter, so they can be combated by lowering tax rates and using monetary policy.
But this, of course, in no way means diminishing the role of public works in solving problems that affect the interests of all members of society, whether it concerns the construction of roads, the reconstruction of cities, the improvement of the ecological environment, etc. However, such work cannot be directly linked to the achievement of rapid stabilization of the economy, the elimination of its short-term recessions. The developed countries of the West drew their own conclusions from the ineffective public works policy that was launched in the 1930s.
Another important element is the change in tax rates. When a short decline in production is predicted, decisions to reduce tax rates appear in addition to built-in stabilizers. Although the progressive taxation system makes it possible to automatically change tax revenues to the budget, which will decrease with a decrease in production and income, this may not be enough to influence the negative situation that has arisen. It is during this period that the need arises to reduce tax rates and increase government spending in order to promote the rise of production and overcome its decline.
Discretionary fiscal policy also provides for additional expenses for social needs. Although unemployment benefits, pensions, benefits for the poor and other categories of needy are regulated by built-in stabilizers (increase or decrease as income-based taxes come in), nevertheless, the government can implement special programs assistance to 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 hand, on careful, cautious 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, indicates that in the development of the economy and other systems social life self-organization must go hand in hand with the organization, i.e. conscious regulation of economic processes by the state.
However, such regulation is not easy to achieve. Let's start with the fact that it is necessary to predict a recession or inflation in a timely manner, when they have not yet begun. It is hardly expedient to rely on statistical data in such forecasts, since statistics sum up the past, and therefore it is difficult to determine future development trends from it. A more reliable tool for predicting the future level of GDP is the monthly analysis of leading indicators, which is often referred to by politicians in developed countries. This index indicates 11 variables that characterize the current state of the economy, including average duration 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, for example, there is a reduction in the working week in the manufacturing industry, orders for raw materials decrease, orders for consumer goods decrease, then with a certain probability one can expect a decline in production in the future.
However, it is rather difficult to determine the exact time when the recession will occur. But even under 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 economic situation. All such non-economic factors will run counter to the need to achieve production stability.
An effective fiscal policy should take into account the real state of the economy, namely, it should be stimulating, i.e. increase government spending and reduce taxes during the emerging decline in production. During the period of inflation that has begun, it should be restraining, i.e. raise taxes and reduce government spending.
1.3 Fiscal policy instruments
Public spending on the purchase of goods and services is a new component in the total cost of PVP production. In order to understand the impact of such expenditures on the change in the production of the domestic product, it is necessary to compare them with the total expenditure on consumption and investment. To do this, we turn to graphical analysis.
On the abscissa axis, we plot the size of the FVP, and on the ordinate axis, the expenditures of the population, enterprises and the state for consumption. Then the points located on the bisector of the coordinate angle will display those states of the economic system in which the volume of FVP will be completely consumed by the population, enterprises and the state. In other words, the total costs at these points will be equal to the corresponding volume of PVP.
Let us now construct a consumption schedule that intersects the bisector at point A, at which the expenditures of the population C will be equal to its consumption. To make our model more realistic, we take into account the costs of enterprises for investments, i.e. Let's add investment spending to the consumer spending of the population. The graph of the total consumption expenditures of the population and enterprises C + Ying intersects the bisector at point B, at which their consumption will be equal to another volume of FVP. Finally, let's add to all these costs the purchase of goods and services by the state. Graph C + Ying + G will cross the bisector at the point where the expenditures of the population, enterprises and the state will be equal to the third volume of FVP.
It can be seen from the figure that whenever the additional costs of investment and government purchases increase, the equilibrium output (NVP) also increases. At point A, where a balance is established between population spending and its consumption, this volume is expressed by the value of OA on the x-axis. At point B, where equilibrium is reached between the expenditures of the population and enterprises, on the one hand, and their consumption of the corresponding volume of NVP, on the other hand, the initial value increases by AB, i.e. makes up a segment with the value ob (. Finally, at the equilibrium point J, where the straight line intersects the bisector, the volume of NVP reaches the value of OE. With an increase in investment and government procurement costs, the corresponding direct consumption and investment It is easy to understand that with a decrease in the same public expenditures, there will be a downward shift in the direct total expenditures on consumption, investment and government expenditures.At the same time, the direct expenditure on consumption of the population, containing only one component, is considered as the initial one. Consequently, with an increase in government spending, the macroequilibrium point shifts along the bisector, caused by an upward shift in the direct total spending, and the volume of FVP increases accordingly.With a decrease in such spending, we will get the opposite result.
Government spending thus increases aggregate spending and thereby stimulates aggregate demand, which in turn contributes to an increase in net domestic product (NDP) and ultimately gross domestic product (GDP). It is also clear that government spending, like spending on consumption and investment, contributes to the growth of national production, and therefore should be used as a regulator in the event of a decline in production.
Since, however, the reduction of these costs causes a reduction in production, they should also be applied during booms and inflation in order to maintain macroeconomic stability and employment. In the D. Keynes model, it was government spending that was intended as the main means of macroeconomic regulation, achieving stability and employment. In the framework of fiscal policy, they also play a major role in comparison with taxation. But to understand why this happens, we need to turn to the analysis of the government spending multiplier.
As a result of the previous discussion, I concluded that an increase in government spending leads to an increase in NVP, and hence GDP. Reducing these costs, on the contrary, reduces the equilibrium volume of FVP. Graphically, this can be represented as a movement of the macroequilibrium point along the bisector: in the first case, it moves up, in the second - down. However, the question arises: to what extent does this increase or decrease in the volume of NVP or GDP occur?
Since public expenditures, in principle, do not differ in their effect from other types of total expenditures, for example, from investments, all the arguments that I have previously derived about the investment multiplier fully apply to them. This means that public spending on the purchase of goods and services has a multiplier, or multiplier, effect. But in order to distinguish the public spending multiplier from the investment multiplier, we can designate the first one with the same letter, but adding the index r. Then, by analogy, we can define this multiplier as the ratio of the increment in NDP to the increment in government spending (GR):
Since the gross domestic product differs from the net one taking into account depreciation costs, for it the corresponding multiplier is defined as an increment in GDP in relation to government spending:
Graphically, the multiplier effect can be represented as an increase in the size of NDP or GDP with an upward shift in the direct total spending on consumption, investment and government purchases.
Let's assume that macroequilibrium is established at the point of intersection of this straight line with the bisector at point E. Then the government spending multiplier acts similarly to the investment multiplier. Therefore, it can be defined by analogy with it:
In the example under consideration, I adopted the PSP equal to 3/4, from which the multiplier Kr = 4 was determined. But, as already known, PSP + PSS = 1, it follows that
Taxes are part of fiscal policy, with their help the state regulates the functioning of the market economy. Such regulation is achieved not directly and directly, as with government spending, but indirectly, through the impact on consumption and savings of the population. To better understand this, let's assume that the state introduces a one-time tax on the population in the amount of a million rubles, and the amount of the tax does not depend on the size of the PVP. It is not difficult to understand that in this case the income at the disposal of the population will also decrease by a million rubles. However, now a decrease in income will cause a reduction not only in consumption, but also in the savings of the population. For simplicity of calculations, we assume that in this case the marginal propensity to consume (PSP) and savings (PSS) will be the same, i.e. PSP = PSS = 1/2.
How will this affect the equilibrium volume of FVP? First, spending on consumption will be reduced not by a million rubles, but only by a/2 million, since spending on savings will also fall by half. Secondly, the reduction in spending on consumption will cause a reduction in total spending, which also includes spending on investment and government purchases. As a result, the schedule of total expenditures will move down.
Accordingly, the volume of the equilibrium FVP also decreases. Therefore, if at point E it was equal to h million rubles, then at point E e at which the new graph crosses the bisector, it will be b - a / 2 million rubles. From this it becomes clear why an increase or decrease in taxes has a smaller impact on the volume of domestic production than government spending on the purchase of goods and services. Such expenditures form part of total expenditures and therefore, along with consumption and investment, they characterize aggregate demand and, therefore, directly affect the volume of domestic production.
With the growth of government purchases, demand increases, and thereby a further increase in production is stimulated. A change in taxes - their increase or decrease - directly affects one of the components of total expenditure, namely, consumption. Therefore, taxes, although they have a multiplier effect, but their impact on the equilibrium volume of production affects indirectly, through consumption, and in magnitude it is less than government spending.
In order to quantify the impact of taxes on the equilibrium volume of NVP, we introduce the concept of a tax multiplier K n, which can be defined through the already known concept of the multiplier of government spending K g. Indeed, since taxes affect the volume of NVP through consumption, the value this impact will be less than the government spending multiplier by the marginal propensity to consume (PSP):
K n \u003d PSP * K g
In our example, taxes have increased by a million rubles, the PSP is 1/2. Substituting these values into the formula, we get K n \u003d a / 2 million rubles. For comparison, let's find the value of the multiplier of government spending when they are halved, i.e. per a/1 mln rub.
From this it can be seen that with the value of the multiplier K r = 2, a decrease in government spending by a / 2 million rubles. leads to a decrease in the equilibrium volume of NVP by a million, and their increase by the same amount leads to an increase by a million. We can say that each currency unit government spending leads to an upward shift in the aggregate demand schedule by one unit, while each monetary unit of taxes shifts this schedule down by 1/2 unit. Ultimately, with an increase in government spending, the equilibrium volume of FVP increases by the value of the multiplier of these costs, and with an increase in taxes, it decreases by the value of the tax multiplier.
If government spending and taxes increase by the same amount, then the equilibrium volume of FVP increases by the same amount. Let's assume that state purchases increased by about a million rubles. Then, with a multiplier equal to 2, the increment in the volume of FVP will be 2c million, and the aggregate demand curve will shift upwards by from units. At the same time, an increase in taxes will lead to a shift in aggregate demand by c / 2 million and a decrease in the equilibrium volume of NVP only by c million. Thus, the same increase in government spending and taxes will cause an increase in NVP by an amount equal to the growth government spending or taxes. From this we can conclude that the multiplier of the joint action of government spending and taxes is equal to one, because in this case the increment in NVP is equal to the initial increment in expenditures or taxes.
Such a multiplier is called in the economic literature the balanced budget multiplier. Let us note that it does not affect government spending and taxes in isolation, but at the same time, because the reduction in NVP caused by an increase in taxes is offset by an increase in government spending, and thus ensures overall growth in NVP.
Now imagine a situation where the increase in taxes will not affect the size of PVP. For this, it is sufficient that the reduction in output caused by taxes is precisely balanced by the impact of government spending, which will increase the volume of NVP. So, if taxes are increased by a million rubles, then NVP will decrease by 0/2 million and its increment will become equal to zero; if we increase government spending by a / 2 million rubles, which, with a multiplier equal to 2, will give an increment equal to a million rubles. It is obvious that society is by no means interested in such stagnation.
Until now, I have considered only the effect on the equilibrium volume of production of consumption costs, i.e. only one part of the income received. Another part of this income is savings, and they obviously also affect the output.
For simplicity of analysis, we assume that investment in this case will be constant, and government spending and taxes are absent. In such an idealized situation, it is easier to identify the relationship between the change in savings and the volume of equilibrium NVP. Obviously, the more money goes to savings, the less money is left for the purchase of goods and services. In the end, a situation may arise when the population is convinced by its own experience that excessive accumulation of savings can lead to a drop in production and, as a result, a decrease in its income or even to poverty.
Let's turn to graphical analysis. Let the size of the FVP be displayed on the abscissa axis, and the size of investments and savings on the ordinate axis. Since we assumed that the size of investments remain constant, their graph will be depicted as a horizontal line parallel to the x-axis.
Let us assume that the amount of savings increased by a million rubles. Then the savings schedule will shift up by a units. The initial state of macroequilibrium at point E 1 corresponds, say, to the volume of FVP = b million rubles. The new state of macroequilibrium at point E will correspond to FVP = b-2a million rubles. at PSP = PSS = 1/2.
Thus, an increase in savings due to the multiplier effect will cause a reduction in the volume of equilibrium NVP compared to savings by b -2a million rubles. Hence it is clear that the reduction in the volume of domestic production is accompanied by a decrease in the income of the population. This situation can continue until, finally, the population realizes that the desire for savings does not make it richer, but poorer. This statement does not apply to the case when there is full employment and production is operating at the maximum level.
Under these conditions, thrift is expedient and benefits both society and the individual. Indeed, to maintain a high level of production and full employment, constant investment is needed. And they are possible only when society consumes less and saves more. This situation is described by the classical economic model, which focuses on full employment and stable output. Graphically, this model can be represented as follows: since savings are growing, and current consumption is falling, so are the prices of rice goods. 1. But at the same time, the entire volume of manufactured products is still sold in full, albeit at lower prices, and therefore the volume of FVP and employment remain stable. The decline in aggregate demand is shown by shifting down the schedule of aggregate demand.
In the Keynesian model, an increase in savings also leads to a reduction in aggregate demand, but at the same time, the volume of domestic production does not remain constant, but decreases, which causes underemployment. Under these conditions, the growth of savings can only increase the decline in production and unemployment.
2. Features of fiscal policy in the Russian Federation
2.1 The need to reform fiscal policy
10-year period of market transformation in Russia made it possible, finally, to develop a clear view on the direction of reform financial system. As noted above, the choice of a set of tax measures of state influence on the national economy depends on what segment of the aggregate supply curve it is currently on. Today (as well as throughout the entire period of reforms), the Russian economy is on the "Keynesian" segment, that is, in that phase of development when production has not yet reached the level of full employment. Consequently, the task of state regulation should not be to limit aggregate demand (which already has very narrow boundaries), but to stimulate its expansion.
Throughout the entire period of reforms, a number of fundamental mistakes were made in the formation of the state's tax strategy. It turned out that the features of the object of reform - the Russian economy - were not taken into account. A certain semblance of monetarism was mistakenly chosen as a theoretical basis, distorted beyond recognition when applied to Russian reality. It can be argued that a real monetary policy was never carried out (it is worth noting at least the administratively carried out “liberalization” of prices and the constantly growing tax bill).
The miscalculations made can be largely justified by the fact that the problems of transition from a centralized administratively controlled state to a regulated market economy are the least developed both in terms of theory and in terms of the practical formation and implementation of economic policy. those models transition period which have been tested in countries of Eastern Europe and South America, failed to prevent a transformational decline there, and their automatic transfer to Russian soil could not give positive results. The practical version of the transformation in Russia turned out to be, as you know, far from any model that existed at that moment, and it differed not for the better.
The entry of the Russian economy into the phase of market relations is marked by a sharp increase in inflationary tendencies. The repeated rise in prices put forward the development and implementation of anti-inflationary measures as the basis for the formation of a favorable production and investment climate. The growth of inflationary processes during the transition period led to a sharp increase in budgetary funds and an increase in the state budget deficit, which objectively forced government bodies management to raise taxes. The presence of a cumbersome public sector, bearing the burden of disproportions and structural distortions of the socialist economy, made it necessary to maintain a high level of public spending, which required an appropriate revenue side, formed mainly from tax revenues.
Thus, the formation of the financial system in Russia took place in an environment that made it impossible to create it on the basis of the long-term tasks of reforming the economy, and not momentary expediency. It is very difficult to find a constructive way out of this situation, since the budget crisis makes it extremely difficult to reduce the tax burden. However, under the current conditions, even high tax rates cannot solve the problem of the budget deficit, and can only completely undermine the financial incentives of enterprises.
In practice, this is what happened. Height tax burden provoked a sharp narrowing of the number of solvent agents (by 1998, the share of unprofitable enterprises in the whole real sector amounted to 53%), as well as the going into the shadows of an increasing number of manufacturers. Well transition economy/ Ed. acad. L. I. Abalkina - M .: ZAO Finstatinform, 2001, With. 306
The tax burden was especially acute during a period of high inflation, when tax withdrawals were accompanied by the payment of inflationary taxes by firms, which further cut financial sources of reimbursement of production costs and savings.
Inflation combined with a decline in production and sharp fluctuations conjuncture has put the formation of a rational tax system in the category of the highest priority tasks. However, the choice of a package of tax instruments (as well as recommendations on other areas of reform - price liberalization, monetary and currency regulation) took place in isolation from the objective conditions and needs of economic development. Today it is obvious that the existing tax strategy needs a change of priorities, and the tax system needs significant liberalization. The restrictive, fiscal nature of the system formed at the stage of reforms, its overload with an excessive amount of taxes and a too high level of tax burden, the intricacy of legislation played an important role in deepening the transformational crisis and criminalizing the economy.
The tightening of tax policy, accompanied by the formation of a rigid budgetary system of financing, is a constant direction of the activity of economic bodies during the transition period (while the country needed the opposite). At the moment, the fiscal orientation of the tax system is still the most important obstacle to economic recovery and the growth of business and investment activity.
The tax system in its current form creates obstacles even to simple reproduction, not to mention expanded, therefore its liberalization is a vital step, the implementation of which has been delayed for a number of years. This is largely due to the fact that even today there is still no evidence-based concept of reform.
For its successful implementation, it is necessary to develop a common strategy, within which such blocks of the economic mechanism as price and investment policy, a set of measures to create a class of effective owners (including the formation of legal support and protection), financial and money-credit policy, tax strategy, measures for social protection of the population, etc.
2.2 Ways and methods of improving the fiscal politicians
The theoretical basis for the formation financial strategy in Russia at the present moment and in the future, reasonable, balanced Keynesianism can become. At this stage, the boundaries of indirect state intervention in the economy need to be expanded (especially in the field of tax regulation). The market mechanism is not able to independently expand the narrow boundaries of solvent demand associated with barter and high taxes. Establishing an overestimated level of tax exemption provokes enterprises to a massive search for legal and semi-legal ways to evade taxes.
The tax system that stimulates the development of production and earning income is a stable and proven factor in economic growth. The political leadership of the country realized the need for a radical transformation of the tax system. The action plan of the Government of the Russian Federation in the field of social watering and modernization of the economy for 2002-2003 identified priority tasks. The dominant macroeconomic policy is tax reform. For the first time, its tasks reflect in a balanced way the need to improve the investment climate and achieve a state budget surplus, a significant reduction and equalization of the tax burden. It can be argued that the task has been set to harmonize the long-term interests of the state, civilized entrepreneurs and the majority of the population.
Legislative basis of the reform -- the Tax Code (the second part in the volume of four chapters), signed by the President, came into force on January 1, 2001.
Let's try to analyze the economic and political conditions that have formed in the country by the time the new stage of tax reform began. First of all, we note the features of the interaction of economic and tax policies. The revival of the economy contributes to the expansion of the tax base, increasing the collection of taxes in "live" money. On the other hand, the introduction of an optimal taxation system stimulates production growth.
Over the past 2.5 years, the Government has finally managed to break the circle of non-payments, in which one ruble of non-fulfillment of budget obligations generated 3.5-4 rubles. non-payments in the economics of the country. This can largely explain the improvement in tax collection in the country. The main event of 1999 for the Ministry of Taxation of Russia was the cessation of the fall and the beginning of the growth of receipts of "live" money in the budget. In the consolidated budget, including the revenues of target budget and state off-budget funds, in 1999, 1044.0 billion rubles were collected. taxes and fees. In the form of "live" money, 793.4 billion rubles were received, or 76% of all receipts. Is the current tax policy effective / Finance, No. 10, 2002, p. 26 In the federal budget, the growth rate of receipts of "live" money outstripped the corresponding indicators for general fee income to the budget.
On the other hand, it was not the devaluation of the ruble, not high export prices for raw materials, but, above all, the real reduction in the tax burden, government spending and the actual elimination of the current budget deficit were the main reasons for the economic recovery in Russia. Today, economists agree that the main factor in the stable functioning of the economy is the tax policy of the state. Research Institute economic analysis led to the conclusion that in order to achieve maximum growth rates, it is necessary in a market economic system to have low parameters of the state fiscal burden on the economy.
An important condition for the implementation of a new stage of tax reform is the trend towards the formation of new standards of business ethics among participants in Russian business. In the nineties, it was believed that the possibility of tax evasion and the export of assets abroad are the norm of business ethics. Currently, there are fresh shadows ........
fiscal policy is a measure that the state uses to influence the economic environment through changes in government spending and taxation. That is why fiscal policy is also called fiscal policy.
State expenditures are an integral part of the state budget, which is why they must be efficient and provide quantitative and qualitative national economic growth. This means that the fiscal policy pursued by the state must meet the following public purposes:
1) smoothing fluctuations in the economic cycle;
2) stabilization of economic growth;
3) achieving full employment of resources (first of all, solving the problem of cyclical unemployment);
4) stabilization of the price level (achievement of moderate inflation rates).
Fiscal policy is the policy of regulation by the government, first of all, of aggregate demand. The regulation of the economy in this case occurs through the impact on the amount of total costs. However, some fiscal policy instruments can also be used to influence the aggregate supply through the impact on the level of business activity.
Fiscal policy instruments expenditures and revenues of the state budget act, namely: 1) public procurement; 2) taxes; 3) transfers.
The impact of fiscal policy instruments on aggregate demand varies. From the aggregate demand formula: AD = C + I + G + Xn(where AD is aggregate demand, C is consumer spending, I – investment expenditures, G – government expenditures, Xn – net exports of the country) it follows that state procurements are its most important component, so their change has a direct impact on aggregate demand. At the same time, taxes and transfers have an indirect impact on aggregate demand by changing the amount of consumer spending (C) and investment spending (I). An increase in government purchases increases aggregate demand, while their reduction leads to its decrease.
Height transfers also increases aggregate demand. On the one hand, with an increase in social transfer payments, the personal income of households increases, and, consequently, with other equal conditions disposable income rises, and consumer spending rises. On the other hand, an increase in transfer payments to firms (subsidies) increases the possibilities for their internal financing, the possibility of expanding production, which leads to an increase in investment costs. Conversely, a reduction in transfers reduces aggregate demand.
Height taxes acts in the opposite direction. An increase in taxes leads to a decrease in both consumer spending (because disposable income is reduced) and investment spending (because retained earnings, which are the source of net investment, are reduced) and, consequently, to a reduction in aggregate demand. Accordingly, tax cuts increase aggregate demand and shift the AD curve to the right, which leads to an increase in real GNP.
Let us determine the impact of fiscal policy on aggregate supply. The offer of all goods and services provide firms, important macroeconomic agents. Aggregate supply is affected by taxes and transfers; government spending has little effect on supply. Firms accept taxes as a regular cost per unit of output, which forces them to reduce the supply of their product. Transfers, on the other hand, are welcomed by entrepreneurs because they can increase the supply of services they provide. When a large number of firms pursue the same policy of supplying goods, the total supply of the entire economy under consideration changes. Thus, the state can influence the state of the economy through the correct introduction of taxes and transfers.
From a simple Keynesian model (the "Keynesian cross" model) it follows that all fiscal policy instruments (government purchases, taxes and transfers) have a multiplicative effect on the economy, therefore, according to Keynes and his followers, the government should regulate the economy with the help of instruments namely fiscal policy, and above all, by changing the amount of public purchases, since they have the greatest multiplier effect.
In the fiscal policy of the governments of developed countries, the mechanism of deliberate manipulation of the legislature in the field of taxation and public spending is widely used to influence the level of economic activity of economic entities.
Depending on the phase of the economic cycle, fiscal policy instruments can be used in different ways. In this regard, distinguish two types of fiscal policy:
1) stimulus policy- if the country is experiencing a depression or is in the stage of an economic crisis, then the state may decide to conduct a stimulating fiscal policy. In this case, the government needs to stimulate either aggregate demand, or supply, or both. To do this, other things being equal, the government increases its purchases of goods and services, reduces taxes, and increases transfers, if possible. Any of these changes will lead to an increase in aggregate output, which automatically increases aggregate demand. The stimulating fiscal policy in most cases leads to an increase in the country's output.
2) containment policy- used during a boom (when the economy overheats). In this case, the government takes measures that are directly opposite to those that are carried out under stimulating economic policy. The government cuts its spending and transfers and increases taxes, reducing both aggregate demand and possibly aggregate supply. Such a policy is regularly pursued by the governments of a number of countries in order to slow down the rate of inflation or avoid its high rate in the event of an economic boom.
To achieve an economic effect in the choice of a particular policy, the time factor is of great importance. The fact is that the policy gives the expected result precisely in periods of recession or during periods of recovery. But it is difficult to determine the time of the decline or the time of the rise, since there is a time lag between the decline and its manifestation. To overcome these difficulties, Western practice uses discretionary and automatic (non-discretionary) fiscal policy. essence discretionary fiscal policy is reduced to a legislative (official) change by the government of the amount of public purchases, taxes and transfers in order to stabilize the economy. Automatic fiscal policy implies an automatic change in the level of government projects; automatic change in taxes and fees, and is also associated with the action of built-in (automatic) stabilizers.
Built-in (or automatic) stabilizers are instruments whose value does not change, but the very presence of which (their incorporation into the economic system) automatically stabilizes the economy, stimulating business activity during a downturn and restraining it during overheating. Automatic stabilizers include: 1) income tax (which includes both household income tax and corporate income tax); 2) indirect taxes (primarily value added tax); 3) unemployment benefits; 4) poverty benefits.
During a downturn in production, tax revenues are automatically reduced. Since income tax and income tax are levied on a progressive scale, the tax pressure becomes easier, the economic downturn is mitigated. Increasing unemployment during a recession automatically leads to an increase in unemployment benefits and other social benefits, which softens the fall in aggregate demand.
During an economic recovery, tax revenues automatically increase due to the progressiveness of taxation. Unemployment benefits are automatically reduced. The tax pressure is increasing, which has a dampening effect on economic growth. Therefore, the governments modern conditions thanks to an objective assessment of the actual state of development of the country's economy, skillful and flexible changes in the use of fiscal policy mechanisms, they are able to actively influence both economic growth and the achievement of success in implementing the principle of social justice.
The advantages of fiscal policy include:
1. Multiplier effect. Like investments, government spending has a multiplier effect, continuing the chain of secondary, tertiary, etc. consumer spending, and also lead to a multiplier effect of the investment itself. The government spending multiplier shows the increase in GNP as a result of the increase in government spending spent on the purchase of goods and services:
where: KG is the government spending multiplier;
DGNP - increment of the gross national product;
DG is the increase in government spending.
The government spending multiplier can also be determined using the marginal propensity to consume, MPC. As a result, the government spending multiplier will be equal to:
KG=DVNP/DG=1/MPC,
Therefore, DVNP=1/(1–MPC)×DG= KG×DG.
This means that if the state increases the volume of its expenditures by a certain amount without increasing budget revenue items, then this is exactly the increase in income. Therefore, a change in government spending causes a change in income proportional to the change in spending.
2. No external lag(delays). The external lag is the period of time between the decision to change the policy and the appearance of the first results of the change. When the government decides to change the instruments of fiscal policy, and these measures come into effect, the result of their impact on the economy appears quite quickly. The external lag is characteristic of a monetary policy that has a complex transmission mechanism(mechanism of monetary transmission).
3. Availability 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 cyclic fluctuations in the economy) occurs automatically.
The disadvantages of fiscal policy are:
1. Displacement effect. economic sense This effect is as follows: an increase in budget expenditures during a recession (an increase in government purchases and/or transfers) and/or a reduction in budget revenues (taxes) leads to a multiplicative increase in total income, which increases the demand for money and raises the interest rate by 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 provokes a reduction in output. Thus, part of the total output is "crowded out" (underproduced) due to the reduction in the amount of private investment spending as a result of an increase in the interest rate caused by the government's stimulating fiscal policy.
2. The presence of an internal lag. The internal lag is the period of time between the need to change the policy and the decision to change it. Decisions to change fiscal policy instruments are made by the government, but their implementation is impossible without discussion and approval of these decisions by the legislative body (Parliament, Congress, State Duma, etc.), i.е. giving them the force of law. These discussions and agreements may require a long period of time. In addition, they only come into effect starting 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, the economy may already begin to rise. As a result, additional stimulus can lead the economy to overheat and provoke inflation, i.e. have a destabilizing effect. Conversely, contractionary fiscal policies designed during the boom may exacerbate the recession due to the presence of a long internal lag.
3. Uncertainty. This shortcoming is typical not only for fiscal, but also for monetary policy. Uncertainty concerns:
Problems of identification of the economic situation. It is often difficult to pinpoint exactly when a recession ends and a recovery begins, or when a boom turns into overheating, etc. Meanwhile, since at different phases of the cycle it is necessary to apply different types policy (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;
Problems of how much to change the instruments of public policy in each given economic situation. Even if the economic situation is correctly defined, it is difficult to determine exactly how much to increase government purchases or cut taxes to ensure that the economy recovers and reaches potential output, but not exceeding it, which can provoke an overheating of the economy and accelerating inflation. And, vice versa, when pursuing a contractionary fiscal policy - how not to bring the economy into a state of depression.
4. Budget deficit. Opponents of Keynesian methods of regulating the economy are monetarists, supporters of the theory of supply-side economics and the theory of rational expectations (rational expectations theory) - i.e. representatives of the neoclassical direction in economic theory consider the state budget deficit to be one of the most important shortcomings of fiscal policy. Indeed, the instruments of stimulating fiscal policy, carried out during a recession and aimed at increasing aggregate demand, are an increase in government purchases and transfers, i.e. budget expenditures, and tax cuts, i.e. budget revenues, leading to an increase in the government budget deficit. It is no coincidence that the recipes for state regulation of the economy that Keynes proposed were called "deficit financing".
Thus, fiscal (fiscal) policy is a set of government measures to change government spending and taxation aimed at ensuring full employment and producing equilibrium GNP.
conclusions
1. Formation of monopolies, disinterest of the market in production public goods, saving environment, the development of fundamental science, inequality in the distribution of income, unemployment, inflation, crises - all this led to the strengthening of the role of the state in the economy in the 20th century.
The purpose of the state's activity in a market economy is to mitigate the negative consequences of the market mechanism. Its main functions are to create legal framework private business, demonopolization, redistribution of income, fight against unemployment, inflation, cyclical development, etc. Negative external effects lead to excessive, and positive external effects to insufficient flow of resources in the industry where these effects occur. By imposing special taxes, various kinds of sanctions or subsidies, the state eliminates these distortions in the distribution of resources.
2. Finance in a broad sense is a system of relations in society regarding the formation, distribution and use of monetary funds (in the areas of: public (state) finance, the credit system, branches of the reproduction process, secondary financial market, international financial relations) in order to fulfill the state of its functions and tasks, to provide conditions for expanded reproduction. In the narrow sense, only state (public) finances are considered finance - a system of monetary relations regarding the formation and use of funds necessary for the state to perform its functions.
The financial system is a set of measures for managing financial relations, including funds of financial resources of centralized and decentralized purpose, the relationship between them, as well as the control subsystem - state and municipal financial authorities and financial services of enterprises. The financial system provides an effective integrated implementation of all functions of finance, allows you to get the maximum integration effect from their interaction, the most complete and efficient use of financial relations for the implementation of the economic policy of the state.
3. The state budget is a balance (estimate) of state revenues and expenditures, its financial plan. The state budget of the Russian Federation includes the federal budget and the budgets of state non-budgetary funds of the Russian Federation, the budgets of the subjects of the Federation and the budgets of territorial state non-budgetary funds, as well as local budgets. Relations between individual budgets are built on the basis of the principle of budgetary federalism, according to which the budget of each level is assigned its own revenues and expenses, which should be financed from this budget. Government spending on economic content is divided into: government purchases of goods and services, transfer payments, social payments and public debt service costs.
In modern conditions, a budget deficit has become typical for the state budget of most countries - the excess of government spending over government revenues. The budget deficit may be the result of an unfavorable economic situation or the result of a purposefully pursued budget policy. There is a structural budget deficit - a deficit in conditions of full employment and a cyclical deficit - a deficit in conditions when unemployment exceeds the natural level. Financing the budget deficit through the issuance of money and loans from the central bank leads to an increase in money in circulation, rising prices, and inflation. Covering the budget deficit by borrowing from the private sector generates a "crowding out effect" - a reduction in private investment as a result of the issuance of government securities.
A permanent budget deficit leads to the emergence of public debt (internal and external). Domestic debt is the money that the government has borrowed from within the country. Significant public debt adversely affects the rate of economic growth, public debt servicing costs increase the budget deficit. External public debt is loans and credits attracted from legal entities and individuals of foreign states, international financial institutions, which give rise to debentures country as a borrower or guarantor of repayment of loans (credits) by other borrowers, denominated in foreign currency. This type public debt is repaid at the expense of proceeds from the export of goods, which can also adversely affect the pace of economic development.
4. The main source of income - taxes - obligatory payments of individuals and legal entities to the state budget. The main functions of taxes are: fiscal, redistributive, control regulatory (stimulating) and reproductive. Principles of taxation: universality, obligation, stability, neutrality of tax systems, fairness, ease of calculation and even distribution of the tax burden. Taxes are divided into direct and indirect. Any tax includes a description of the subject and object of taxation, the tax rate, the source of the tax, tax incentives, tax sanctions. Depending on the nature of the change in the tax rate, there are proportional, progressive and regressive taxes.
5. Fiscal policy is the measures that the state uses to influence the economic environment through changes in government spending and taxation. That is why fiscal policy is also called fiscal policy.
It is based on the premise that changes in tax collections and government spending affect aggregate demand and hence GNP, employment and prices. In the short run, tax cuts and government spending increase have an upward effect on aggregate demand, and vice versa, tax increases and government spending cuts decrease aggregate demand. In the long run, fiscal policy can have a negative impact on economic growth. A feature of fiscal policy is that all changes in taxes and government spending are reflected in the volume of GNP with a multiplier effect.
Changes in taxes and government spending can occur either automatically (without special legislative decisions) through built-in stabilizers that maintain economic stability through self-regulation, or as a result of targeted government decisions (discretionary policy). Depending on the goals pursued, fiscal policy can be stimulating or restraining. Expansionary fiscal policy aims to expand aggregate demand by cutting taxes and increasing government spending. The result of such a policy is a budget deficit. A contractionary fiscal policy is aimed at narrowing aggregate demand, involves increasing taxes and reducing government spending, and is accompanied by a reduction in the budget deficit or the appearance of a budget surplus. Although fiscal policy is an effective tool for state regulation of a market economy, it is characterized by some shortcomings that reduce its effectiveness. These include: the crowding out effect, the presence of an internal lag, uncertainty, and the budget deficit.
12.2. THE STATE BUDGET.
12.4. STATE DEBT.
12.1. FINANCIAL SYSTEM OF THE STATE.
Finances (pl. from lat. financia - an order to pay) are funds Money arising in the process of social reproduction in the main economic entities and used for national needs and the needs of social reproduction. Usually it is about:
trust funds of the state (general state or centralized finance) and
· decentralized finance of economic entities (enterprises).
In the process of formation and use of these funds of funds, financial relations arise. With the help of financial relations, the state carries out a direct redistribution of national income in order to stimulate the most efficient management process.
The financial system of the state is a system of economic relations associated with the formation and use of funds of funds intended to meet national needs and the needs of expanded reproduction, as well as institutions that manage and control the use of funds from these funds.
General government finance includes:
1. Budget system (state and local budgets).
2. State off-budget trust funds;
3. State loan;
4. State insurance funds
Tasks solved by the system of national finance:
Development of the manufacturing sector
· Development social sphere(culture, sports, education, etc.)
· Providing financial resources for the needs of defense, government, law enforcement.
In the market economy countries, the production sector develops and improves through self-financing, attraction of credit and other resources. The state provides support only to priority sectors of the economy and is carried out in the following areas:
1. Development of industries and industries that ensure the development of scientific and technological progress.
2. Industries producing exportable or scarce products;
3. Development of sectors and industries of national importance (energy, some sectors of the extractive industry and agriculture)
12.2. THE STATE BUDGET.
State budget(from English budget - a suitcase, a bag of money.) - leading link in the financial system. Through the budget, constant mobilization of resources and their spending are carried out.
The state budget is the main financial plan of the state for this year having the force of law. Approved by legislative authorities - parliaments.
The main functions of the state budget. The state budget of modern foreign countries performs the following main functions:
1 redistribution of national income. About 50% of GDP is redistributed through the state budget. The budget is widely used for:
· intersectoral redistribution of financial resources. In this way, intersectoral proportions are improved and the allocation of priority sectors of the economy is ensured.
· Territorial redistribution of financial resources. Through the tax system, financial resources are withdrawn from regions where they are available in a relatively excess volume and directed to resource-deficient regions, thereby ensuring their development. As a rule, these are areas that are poor natural resources or environmentally affected, etc.
· redistribution of income between different groups of the population through the tax system and the system of social transfers.
Using the budget, the state introduces profound changes in the proportions that take shape at the stages of production and the primary distribution of the national income.
2 government regulation and economic stimulation. The redistribution of national income to a large extent makes it possible to realize next function state budget - state regulation and stimulation of the economy.
3 financial security social policy . The state budget has become a major source of funds for the reproduction of the labor force. As scientific and technological progress the reproduction of the labor force is increasingly dependent on spending on education, health care, social insurance and provision.
4 the implementation of all these functions is complemented by the implementation control over the formation and use of a centralized fund of funds. It includes monitoring compliance with financial and economic legislation in the process of formation and use of monetary funds, assessing the effectiveness of financial and economic operations and the appropriateness of the costs incurred.
P The period during which the approved budget is valid is called fiscal year.
Composition of the budget. In the broad sense of the word, the budget is a balance, in one side of which are all incomes, in the other - expenses. (vertical and horizontal composition of the budget)
Budget revenues - part of the centralized financial resources of the state necessary for the performance of its functions. The following main sources of budget revenue can be singled out: taxes, state loans, income from the use of state property; income from privatization; grants or gifts; money issue.
1) The main method of redistributing national income is taxes, providing the predominant share of budget revenues. So, in the revenues of the central budget of various states, tax revenues are about 9/10. The share of taxes in the income of members of the federation and local budgets is much smaller. These budgets are formed at the expense of fixed ( own income relevant budgets) and regulatory (revenues transferred from the higher level of the budget system to the lower) income.
2) The next budget revenues in terms of their financial importance are government loans. The state resorts to this method in case of budget deficits, which are provided for in the preparation of the budget for the coming year. There are two ways to obtain government loans: 1) government loans received from individuals and legal entities by issuing securities on behalf of the state; 2) loans received from central bank and other lending institutions. The increase in the volume of credit operations of the state leads to an increase in public debt. And often leads to higher taxes. Its repayment and the payment of interest on it are carried out to a large extent at the expense of tax payments or by new credit operations. obtaining government loans from individual states or from international financial and credit institutions. Therefore, funds mobilized on the basis of government loans should be considered not as a source of budget revenue generation, but as a way of temporary replenishment. budget fund.
3) income from the use of state property;
4) income from privatization;
5) grants (gifts) from foreign governments or international organizations. Grants can be provided either to fund a particular project or simply to support the budget of struggling friendly states. Grants are not considered a budget financing item and are shown in its revenue side, and not "below the line". If the grant is for the purchase of capital goods, it is considered capital. All other grants are current. Grants differ from loans in that grants do not come with a contractual obligation to repay the amounts received.
6) in emergency circumstances, when it is difficult to receive tax payments, state loans, the state turns to issue of paper money. This is the most unpopular method, as it causes an increase in the money supply without adequate commodity security and leads to an intensification of the inflationary process, which has severe socio-economic consequences.
depending from state structure countries distinguish:
a) in a unitary state - revenues of the central (state) budget and revenues of local budgets;
b) in a federal state - revenues of the federal budget, revenues of the budgets of members of the federation and revenues of local budgets;
public spending budget represent the costs incurred in connection with the performance of the state of its tasks and functions.
Since the beginning of the 20th century, the main trend in the field of state budget expenditures has been a constant increase. A spasmodic increase in spending occurs during periods of war, when they increase tenfold. However, in the second half of the XX century. the share of military spending decreased and social spending increased, the cost of intervention in the economy.
State budget expenditures of countries with developed market economies divided into the following five groups:
1 social goals;
2 intervention in the economy;
3 military;
5 provision of subsidies and loans to developing countries.
The main expenditures in the state budget are military, for intervention in the economy and for social purposes.
I. Social spending includes spending on education, health care, social security and social Security. They pass through numerous social programs. There are about 100 such programs in the US and several dozen in the UK. The cost of social insurance is largely financed by the workers themselves.
2. A rapidly growing group of government spending are economic intervention costs(budget financing) . For example, the costs of research and development (R&D from 50 to 70% of all research costs), economic and social infrastructure, agricultural support, government industries economy, providing employment in certain sectors of the economy and regions of the country, to stimulate exports.
Subsidies to private firms have risen, especially in the so-called development areas. These include areas with high level unemployment and slow economic growth.
Some countries provide employment subsidies to entrepreneurs for newly hired workers. Significant resources from the state budget are allocated to agriculture. In the countries of the European Union (EU), agriculture is supported not only at the national, but also at the interstate level.
Active assistance is also provided to export firms, which greatly facilitates their position in the face of intense competition in world markets. stimulates relatively high rates of economic growth, but also softens its cyclical fluctuations. The share of state budget expenditures on intervention in the economy increased from 15-17% in the mid-50s to 20% in the mid-60s and 22-25% in the 80s-90s.
3. On military spending in the leading foreign countries account for up to 20 of the total expenditures of the state budget. They are divided into direct and indirect military spending. Direct military spending are reflected in military budgets - a delimited part of the state budget. They include expenditures on the production of the latest offensive strategic weapons, the maintenance and training of personnel of the armed forces, scientific research of a military nature, and the maintenance of militaristic blocs (NATO).
Direct military spending rises sharply during periods of war and under conditions of militarization of the economy.
TO indirect military spending include part of the interest paid on the public debt, indemnities and reparations, pensions and benefits for war invalids and the families of the dead. as well as military spending, which are held under the articles of civilian departments. And
4. Expenses for the maintenance of the state administrative apparatus include the costs of maintaining legislative and executive authorities, courts, prosecutors, police, various ministries and departments. In general, expenditures on the state apparatus occupy 4-5% of the total amount of budget expenditures.
5. Expenses for foreign economic activity.
6. Expenses for servicing the public debt
Budget expenditures, being an important part of public expenditures as a whole, express the economic relations that arise in connection with the use of the funds of the national monetary fund.
There are 3 options for the state of the budget fund:
· balanced the state when income is equal to expenses;
· surplus when income exceeds expenses;
· deficit, when expenses exceed income.
The most typical is deficiency.
12.3. TAXES: ESSENCE, FUNCTIONS, TYPES. LAFFER CURVE.
Taxes play a decisive role in budget revenues.
Taxes - mandatory payment levied by the state from individuals and legal entities, which are of a fiscal nature.
The state cannot exist without taxes, since they are the main method of mobilizing income in the conditions of market relations. A. Smith substantiated their necessity and was the first to formulate the basic principles (rules) of taxation.
Figure 12.1– Principles of taxation
uniformity or principle of justice - the subjects of the state should, as far as possible, according to their ability and strength, that is, according to their income, participate in the maintenance of the government;
certainty - the tax which each individual is obliged to pay must be precisely determined, and not arbitrary. The term of payment, the method of payment, the amount of payment - all this must be clear and definite for the payer;
convenience- each tax should be levied at the time or in the manner when and how it should be more convenient for the payer to pay it;
saving- every tax should be so conceived and worked out that it deducts from the revenues of the people as little as possible in addition to what it brings to the treasury of the state.
· tax should be levied on income, not on capital. It is extremely important that taxation does not harm national capital. The taxation of any country should not exceed the highest tax rates that currently exist in developed countries. As a result, the danger of depriving the country by taxing part of its capital will be eliminated.
Tax functions reveal their socio-economic essence, inner content. In modern conditions, taxes perform three functions: fiscal, regulatory and stimulating.
1. Fiscal function - basic, characteristic initially for all states. With its help, state cash funds, i.e., the material conditions for the functioning of the state. It is this function that provides a real opportunity to redistribute part of the value of the national income in favor of the least well-to-do social strata of society.
The value of the fiscal function increases with an increase in the economic level of development of society. 20th century characterized by a huge increase in government revenue from taxes, which is associated with the expansion of its functions and certain policies social groups those in power.
The fiscal function of taxes creates objective prerequisites for state intervention in economic relations, i.e., it determines the regulatory function.
2. Regulating function means that taxes, as an active participant in redistribution processes, have a significant impact on reproduction, stimulating or restraining its pace, strengthening or weakening the accumulation of capital.
3. Stimulating. Taxes affect the level and structure of aggregate demand, and through the mechanism of market demand, they can promote production or slow it down. The ratio between production costs and the price of goods and services depends on taxes, which is decisive for entrepreneurs in the process of using or selling production capacities.
In the modern state, there are various types of taxes (Figure 12.2.)
Direct- personal income tax, corporate income tax, property tax and a number of others.
Indirect - these are taxes levied in the prices of goods and services (VAT), excises, customs duties, fiscal monopoly taxes. Direct taxes prevail in Canada, USA, Japan, Denmark, and indirect - in France, Italy, Norway. In general, countries have shifted towards direct taxation. Tax revenues to the state budget of the Republic of Belarus are dominated by indirect taxes. This indicates that the country's tax system performs a fiscal rather than a stimulating function.
Figure 12.2– Types of taxes
Classification depending on the object of taxation and its purpose is especially important:
1 personal income tax. The largest income among direct taxes is provided by personal income tax - from 25 to 45% or more of the total state budget revenues.
2 corporate income tax. One of the most striking trends in the field of direct taxation in Western countries is the constant decline in the share of corporate income tax revenues. So, in the United States on the eve of World War II, revenues from this tax accounted for almost half of all tax revenues. federal budget, in 1998 - 12%.
The same processes occur in all other economically developed countries. The share of this tax in total budget revenues fluctuates from 5.5% in France and Germany, up to 10-11% in the UK.
3 value added tax (VAT). Among indirect taxes in foreign developed countries, value added tax (VAT) is of the greatest importance. VAT is the most important component of the tax systems of 42 states, including 17 European ones (valid in all EU countries). Of the leading foreign countries, VAT is not applied in the USA and Japan. This tax accounts for 30 to 50% or more of all indirect taxes. In order to stimulate exports, all exported goods are exempt from VAT.
4 excises(tobacco, spirits, beer, wine, gasoline).
5 customs duties are taxes levied on the import and export of goods. In connection with the internationalization of economic life, the development of the international division of labor, the role of customs duties as a source of income after the Second World War in the economically developed Western countries was constantly decreasing. This is due to the general reduction in customs tariffs for industrial goods under the General Agreement on Tariffs and Trade (GATT)", the creation of duty-free trade zones in the EU, EFTA countries, etc.
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Tax payments are the most important instrument of state macroeconomic regulation. Taxes should provide the revenue side of the budget with financial resources and, at the same time, they should not be too high in order to maintain incentives for the development of production among national producers. An increase in the tax rate above its optimal value will lead to a reduction in national production and a decrease in the amount of tax revenues to the state budget. This was shown by A. Laffer, adviser to President R. Reagan
Figure 12.3 - Laffer curve
Using the tax function: T = t Y, A. Laffer showed that there is optimal rate tax (t opt.), at which tax revenues are maximum (T max .). If you increase the tax rate, then the level of business activity (total output) will decrease, and tax revenues will decrease, since the taxable base (Y) will decrease (Figure 12.3). Therefore, in order to combat stagflation (a simultaneous decline in production and inflation), A. Laffer in the early 80s proposed such a measure as a reduction in the tax rate (both income and corporate profits).
12.4. STATE DEBT.
As we have already noted, of the three possible states of the budget fund, the most typical for modern state is a state of scarcity. The state budget deficit can be covered by government borrowing. Government borrowing leads to the emergence of such a thing as public debt.
Public debt - the result of financial borrowing by the state, carried out to cover the budget deficit. The public debt is equal to the sum of the deficits of previous years, taking into account the deduction of budgetary surpluses.
The implementation of government loans from residents generate domestic debt and from non-residents - external debt. The sum of the external and domestic debt- This the country's national debt.
Types of public debt:
- Capital public debt represents the entire amount of issued and outstanding debt obligations of the state, including accrued interest, which must be paid on these obligations;
- current public debt make up the costs of paying income to creditors on all debt obligations of the state and repaying obligations that are due;
Public debt is also divided into short-term (up to one year), medium-term (from one year to five years) and long-term (over five years). The heaviest are short-term debts. They soon have to pay the principal amount with high interest.
The indicator of the amount of public debt is reflected in the SNA and the state controls this most important macroeconomic indicator. The IMF has calculated and established the critical values of the public debt. The external debt of the country should not exceed:
60% of GDP ;
ratio of external debt to exports of goods and services (critical value) – 220 %;
· the ratio of payments on external debt to the export of goods and services - 25%.
Each state manages the public debt so that its value does not exceed a critical value.
Public debt management - this is a system of measures aimed at servicing the debt (payment of interest on it) and its repayment.
Financing of expenses related to the servicing and repayment of the public debt is carried out at the expense of:
1 tax increases (the main, but not the only source);
2 sale of state property;
3 profit if the funds are used productively;
4 implementation of new loans.
The placement of new government loans to pay off debts already issued is called refinancing the public debt.
The presence of public debt has the following real negative consequences:
· the repayment of domestic debt by paying interest to the population increases the inequality in the incomes of different social groups, since a significant part of government obligations is concentrated among the wealthiest part of the population. Therefore, those who have state securities, when they are redeemed, they will become even richer;
· raising taxes to pay interest on the public debt can undermine the effect of economic incentives for the development of national production;
· government borrowing in the national banking system to pay interest on public debt leads to a reduction in investment within the country;
· The presence of public debt creates psychological tension in the country, giving rise to uncertainty in the business activity of its economy.
12.5. FISCAL POLICY: ESSENCE AND TYPES.
In order to accelerate economic growth, control employment and inflation, the state implements fiscal, or fiscal policy.
fiscal policy is a system of measures taken by the government to stabilize the economy by changing the amount of revenues and / or expenditures of the state budget. (Therefore, fiscal policy is also called fiscal policy.)
Goals fiscal policy, like any stabilization (counter-cyclical) policy aimed at smoothing cyclical fluctuations in the economy, are to ensure:
1) stable economic growth;
2) full employment of resources (primarily solving the problem of cyclical unemployment);
3) stable level prices (solution to the problem of inflation).
Fiscal policy is the government's policy of regulating, first of all, aggregate demand. The regulation of the economy in this case occurs through the impact on the amount of total costs. However, some fiscal policy instruments can also be used to influence the aggregate supply through the impact on the level of business activity.
Fiscal policy is carried out by the government.
Tools fiscal policy are the costs and revenues of the state budget, namely: 1) public procurement; 2) taxes; 3) transfers.
According to the methods of implementation, fiscal policy is distinguished: 1) discretionary and 2) automatic (non-discretionary).
Discretionary fiscal policy represents a legislative (official) change by the government of the amount of public purchases, taxes and transfers in order to stabilize the economy.
Automatic fiscal policy associated with the action of built-in (automatic) stabilizers.
Automatic stabilizers are tools whose value does not change, but the very presence of which (their integration into the economic system) automatically stabilizes the economy, stimulating business activity during a recession and restraining it during overheating. That is, there is a natural adaptation of the economy to the phases of the economic cycle
Automatic stabilizers include: 1) income tax; 2) unemployment benefit.
Income tax works as follows: in a recession, the level of business activity (Y) decreases, and therefore the amount of tax revenue decreases. In the context of economic growth, employment is growing, output is increasing, profits are growing, tax revenues with progressive system taxes increase even at a constant tax rate. An increase in taxes reduces the amount of total spending and has an anti-inflationary effect on the economy. Since economic growth is accompanied by an increase in employment, transfer government payments (unemployment benefits, poverty benefits) are decreasing, which also restrains the development of inflation. Conversely, in an economic downturn, tax revenues automatically fall and transfer payments (unemployment benefits) rise, thereby helping to increase aggregate spending and reduce unemployment.
Such fiscal policy instruments as taxes and transfers act not only on aggregate demand, but also on aggregate supply.
Since firms view taxes as a cost, higher taxes lead to a reduction in aggregate supply, and tax cuts increase business activity and output. A detailed study of the impact of taxes on aggregate supply belongs to the American economist, one of the founders of the concept of "supply economics" Arthur Laffer (Figure 12.3).
In developed countries, the economy is regulated by 2/3 through discretionary fiscal policy and by 1/3 through the action of built-in stabilizers.
Depending on the phase of the cycle in which the economy is located, fiscal policy instruments are used in different ways. There are two types of discretionary fiscal policy: 1) stimulating and 2) restraining.
Stimulating fiscal policy(fiscal expansion) is applied during a recession (Fig. 12.4 (fiscal expansion)) and involves an increase in government spending, tax cuts, or a combination of these measures. It reduces the recessionary output gap and lowers the unemployment rate, aimed at increasing aggregate demand (aggregate spending). Its instruments are: a) increase in public procurement; b) tax cuts; c) increase in transfers.
Contractionary fiscal policy(fiscal restriction) is aimed at limiting the cyclical recovery of the economy and involves reducing government spending and increasing taxes. (fig.12.4). It aims to reduce the inflationary output gap and reduce inflation and is aimed at reducing aggregate demand (aggregate spending). Its instruments are: a) reducing government purchases; b) an increase in taxes; c) reduction of transfers.
Figure 12.4– Stimulating and contractionary fiscal policy
The fiscal policy in the Republic of Belarus is restraining, which is associated with inflationary processes in the national economy. The modern fiscal policy of the Republic of Belarus implies a reduction in state budget expenditures and an increase in its revenues mainly through non-tax instruments (using privatization mechanisms, stimulating business activity).
In addition, the tax policy is also being improved. This is due to the fact that the state's fiscal policy has so far been of a fiscal-protective nature, in which the state has sought to ensure a high degree of protection of the population. This meant a high tax burden on the economy. In this regard, there was a slowdown in the development of production, a decrease in the collection of tax payments, and there was a deterioration in the collection of taxes. Further reform of the tax system in the republic involves further simplification of the tax system and reduction of the tax burden of the main business entities.
Fiscal policy is the measures taken by the government to stabilize the economy by changing the amount of revenues and / or expenditures of the state budget. Therefore, fiscal policy is also called fiscal policy.
Fiscal policy is the government's policy of regulating, above all, aggregate demand. The regulation of the economy in this case occurs through the impact on the amount of total costs. However, some fiscal policy instruments can also be used to influence the aggregate supply through the impact on the level of business activity. Fiscal policy is carried out by the government. Fiscal policy can both beneficially and quite painfully affect the stability of the national economy.
Fiscal policy is aimed at resolving the numerous tasks facing society, which form the so-called tree of goals. The main ones are:
- 1. in the short term:
- - effective formation of the revenue part of the budget;
- - implementation of the state budget policy;
- - taking measures to reduce the budget deficit;
- - public debt management;
- - Smoothing out cyclical fluctuations in the economy.
- 2. in the long run:
- - maintaining a stable level of total output (GDP);
- - maintaining full employment of resources;
- - maintaining a stable price level.
Figure 1.1 - Fiscal policy goals
Application- Source:
Modern fiscal policy determines the main directions for the use of the state's financial resources, methods of financing and the main sources of replenishment of the treasury. Depending on the specific historical conditions in individual countries, such a policy has its own characteristics. However, a common set of measures is used. It includes direct and indirect financial methods of economic regulation.
Direct methods include methods of budgetary regulation. The state budget finances:
- - the cost of expanded reproduction;
- - unproductive expenses of the state;
- - development of infrastructure, scientific research, etc.;
- - implementation of structural policy;
- - maintenance of the military-industrial complex, etc.
With the help of indirect methods, the state influences financial opportunities producers of goods and services and the size of consumer demand.
The taxation system plays an important role here. By changing tax rates for various types of income, providing tax incentives, reducing the non-taxable minimum income, etc., the state seeks to achieve the most sustainable economic growth rates and avoid sharp ups and downs in production.
Among the important indirect methods that promote the accumulation of capital is the policy accelerated depreciation. In essence, the state exempts entrepreneurs from paying taxes on part of the profits artificially redistributed to the sinking fund.
The above goals are also achieved through fiscal policy instruments, which include:
- - tax regulators: manipulation of various types of taxes and tax rates, their structure, objects of taxation, sources of taxes, benefits, sanctions, terms of collection, methods of payment;
- - budgetary regulators: the level of centralization of funds by the state, the ratio between the federal or republican and local budgets, the budget deficit, the ratio between the state budget and extra-budgetary funds, budget classification of income and expenditure items, etc.
The most important comprehensive tool and indicator of the effectiveness of fiscal policy is the state budget, which combines taxes and expenditures into a single mechanism.
Different tools affect the economy in different ways. Government purchases form one of the components of total costs, and, consequently, demand. Like private spending, public procurement increases the level of total spending. In addition to public procurement, there is another type of government spending. Namely, transfer payments. Transfer payments indirectly affect consumer demand by increasing household disposable income. Taxes are an instrument of negative impact on total spending. Any tax means a reduction in disposable income. A decrease in disposable income, in turn, leads to a reduction not only in consumer spending, but also in savings.
The impact of fiscal policy instruments on aggregate demand is different. From the aggregate demand formula:
AD = C + I + G + Xn , (1.1)
where C is the value of consumer spending;
I - investment costs;
G - public procurement;
Xn - taxes and transfers.
It follows that government purchases are a component of aggregate demand, so their change has a direct impact on aggregate demand, while taxes and transfers have an indirect impact on aggregate demand, changing the amount of consumer spending and investment spending.
At the same time, the growth of government purchases increases aggregate demand, and their reduction leads to a decrease in aggregate demand, since government purchases are part of total spending.
The increase in transfers also increases aggregate demand. On the one hand, since with an increase in social transfer payments, the personal income of households increases, and, consequently, ceteris paribus, disposable income increases, which increases consumer spending. On the other hand, an increase in transfer payments to firms (subsidies) increases the opportunities domestic financing firms, the possibility of expanding production, which leads to an increase in investment costs. Reducing transfers reduces aggregate demand.
Increasing taxes works in the opposite direction. An increase in taxes leads to a decrease in both consumer spending (because disposable income is reduced) and investment spending (because retained earnings, which are the source of net investment, are reduced) and, consequently, to a reduction in aggregate demand. Accordingly, tax cuts increase aggregate demand, which leads to an increase in real GNP.
Therefore, fiscal policy instruments can be used to stabilize the economy at different phases of the economic cycle.
Moreover, from a simple Keynesian model (the “Keynesian Cross” model) it follows that all fiscal policy instruments (public procurement, taxes and transfers) have a multiplicative effect on the economy, therefore, according to Keynes and his followers, economic regulation should be carried out by the government with using fiscal policy instruments, and above all, by changing the amount of public purchases, since they have the greatest multiplier effect.
Depending on the phase of the cycle in which the economy is located, fiscal policy instruments are used in different ways. There are two types of fiscal policy:
- 1) stimulating;
- 2) restraining.
Figure 1.2 - Types of fiscal policy
Note- Source:
Expansive fiscal policy is applied during a downturn (Figure 1.2(a)), aims to narrow the recessionary output gap and lower the unemployment rate, and aims to increase aggregate demand (aggregate spending). Her tools are:
- - increase in public procurement;
- - tax cuts;
- - increase in transfers.
Contractionary fiscal policy is used during a boom (when the economy is overheated) (Figure 1.2 (b)), aims to reduce the inflationary output gap and reduce inflation, and is aimed at reducing aggregate demand (aggregate spending). Her tools are:
- - reduction of public procurement;
- - increase in taxes;
- - reduction of transfers.
In addition, there are fiscal policies:
- 1) discretionary;
- 2) automatic (non-discretionary).
Discretionary fiscal policy is a legislative (official) change by the government of the amount of government purchases, taxes and transfers in order to stabilize the economy.
Automatic fiscal policy is associated with the action of built-in (automatic) stabilizers. Built-in (or automatic) stabilizers are instruments whose value does not change, but the very presence of which (embedded in the economic system) automatically stabilizes the economy, stimulating business activity during a downturn and restraining it during overheating. Automatic stabilizers include:
- - Income tax (which includes both household income tax and corporate income tax);
- - indirect taxes (primarily value added tax);
- - unemployment benefits;
- - poverty benefits.
Let us consider the mechanism of impact of built-in stabilizers on the economy.
The income tax works as follows: during a recession, the level of business activity (Y) decreases, and since the tax function has the form:
Т = t * Y , (1.2)
where T is the amount of tax revenues;
t is the tax rate;
Y - the value of total income (output),
then the amount of tax revenues decreases, and when the economy "overheats", when the value of actual output is maximum, tax revenues increase. Note that the tax rate remains unchanged. However, taxes are withdrawals from the economy that reduce the flow of spending and hence income (remember the circular flow model). It turns out that withdrawals are minimal during a recession, and maximal during overheating. Thus, due to the presence of taxes (even lump-sum, i.e. autonomous) the economy, as it were, automatically “cools down” when it overheats and “warms up” during a recession. The appearance of income taxes in the economy reduces the value of the multiplier (the multiplier in the absence of an income tax rate is greater than in its presence: > ), which enhances the stabilization effect of the income tax on the economy. It is obvious that a progressive income tax has the strongest stabilizing effect on the economy.
Value Added Tax (VAT) provides built-in stability in the following way. During a recession, sales fall, and since VAT is indirect tax, part of the price of the goods, then with a fall in sales, tax revenues from indirect taxes (withdrawals from the economy) are reduced. When overheating, on the contrary, because they grow total income, sales increase, which increases revenue from indirect taxes. The economy will automatically stabilize. fiscal policy capital economy
With regard to unemployment and poverty benefits, the total amount of their payments increases during a recession (as people begin to lose their jobs and become poor) and decrease during a boom, when there is “overemployment” and income growth. Obviously, in order to receive unemployment benefits, you need to be unemployed, and to receive poverty benefits, you need to be very poor. These benefits are transfers, i.e. injections into the economy. Their payment contributes to the growth of income, and, consequently, expenses, which stimulates the recovery of the economy during a recession. A decrease in the total amount of these payments during a boom has a moderating effect on the economy.
In developed countries, the economy is regulated by 2/3 through discretionary fiscal policy and 1/3 through built-in stabilizers.
It should be borne in mind that such fiscal policy instruments as taxes and transfers act not only on aggregate demand, but also on aggregate supply. As noted, tax cuts and increased transfers can be used to stabilize the economy and combat cyclical unemployment during a downturn, stimulating aggregate spending and hence business activity and employment. However, it should be borne in mind that in the Keynesian model, simultaneously with the growth of aggregate output, tax cuts and an increase in transfers cause an increase in the price level (from P 1 to P 2 in Figure 1.2 (a)), i.e. is a pro-inflationary measure (provokes inflation). Therefore, during a boom (inflationary gap), when the economy is “overheated” (Figure 1.2 (b)), as an anti-inflationary measure (the price level decreases from P 1 to P 2) and tools to reduce business activity and stabilize the economy, an increase in taxes and reduction in transfers.
However, since firms treat taxes as a cost, an increase in taxes leads to a reduction in aggregate supply, and a reduction in taxes leads to an increase in business activity and output. A detailed study of the impact of taxes on aggregate supply belongs to the economic adviser to US President R. Reagan, an American economist, one of the founders of the concept of "economic theory of supply" Arthur Laffer. A. Laffer built a hypothetical curve (Figure 1.3), with the help of which he showed the impact of a change in the tax rate on the total amount of tax revenues to the state budget. This curve is called hypothetical because Laffer made his conclusions not on the basis of an analysis of statistical data, but on the basis of a hypothesis, i.e. logical reasoning and theoretical reasoning.
Figure 1.3 - Laffer Curve