Taxation and Government Expenditures in the Center of the Albanian Policy Debate

Abstract

There are only a very limited number of instruments at a government's disposal when it tries to stimulate long-run growth, and one of these instruments is fiscal policy. The last few years we have seen government spending, taxation, and deficit financing move to the forefront of policy debates worldwide. That is why it's very important to analyze the way in which taxation and government expenditures influence economic growth. This problem is especially vital for the countries suffering very low or negative rates of growth, as Albania is. The aim of this study is to have a clear view of the fiscal reform process and economic development in Albania starting from 1991 till to present and to analyze the impacts of tax revenue and government expenditures on economic growth and development. In general a tax policy aiming at reducing the number of taxes and tax rates, expanding tax incentives to encourage investment, boost exports, encourage the development of domestic production, transfer economic structure and stabilize finance and monetary policies in accordance with the requirements of a market economy to meet the requirements of international economic integration. Tax policy has contributed to encourage investment and promote business and production. Entrepreneurs and investors considered the tax reduction rate and the increase of government expenditures extremely positive and encourage business investment decisions and expansion. Government expenditures in sectors like education, health, infrastructure, and research and development have a positive impact on economic development of a country.