ASSESSMENT OF DEPENDENCE OF ECONOMIC GROWTH ON PUBLIC FINANCES (COMPARATIVE ANALYSIS OF AZERBAIJAN AND GEORGIA)
Journal Title: Інноваційна економіка - Year 2017, Vol 67, Issue 1
Abstract
Purpose. The definition of interrelation between the economic growth and one of components of the “Index of Leftness (Rightness) of Economy (IL(R)E) is the “Public Finances” subindex (PF) and its subindeces. Thus, the main task of this work is to determine “the optimum limit” for tax collecting which is not influencing negatively the efficiency of national economy. Methodology of research. In the working process, the authors used the PF subindex, which is calculated as an arithmetic average of two subindeces: “Budgetary Expenses” (BE) and “Tax Burden” (TB). According to our methodology, the BE sub index is calculated as percentage of the budgetary expenses in GDP (necessary information is obtained from statistical base of IMF). The TB subindex is calculated as ratio of the paid taxes within a year of the modeled private company, and its revenues (necessary information is obtained from the report “Business environment” of the World Bank). When calculating both subindeces of the PF subindex, as possible minimum, Vmin=0, and possible maximum – Vmax=100 are accepted. The presented methodology allows us to determine the optimal border tax fees with high probability, which will contribute to the implementation of social programs in the country and economic growth. Findings. The results of the research are obtained on the basis of comparative analysis of economic policies of countries, which significantly vary in their formation of public finances. The research is constructed as comparative analysis of economic policy of Azerbaijan and Georgia as the big difference of the PF subindexes is peculiar to these countries: it was found that the Georgian economy is much more “right”, having rather very low public expenditures and taxes. It was discovered that the policy of Azerbaijan is characterized by the high public expenditures and taxes, having appeared among “left”. It is proved that in spite of the fact that between the PF subindex and volume of GDP there is no functional dependence, there are correlation between the PF subindex and volume of GDP per capita for separately taken country. Originality. The PF subindex is used as one of the IL(R)E components and contains both tools of fiscal policy. Thus, it is a composite index. Calculation of the subindex as composite index is carried out for the first time as in scientific research practice only one of these tools were usually conducted. Practical value. Results of the research are constructed according to the comparative analysis of economic policies of the countries significantly differing with formation of public finances. The presented methodology allows to define with big reliability an “optimum limit” of tax burden which will promote implementation of social programs, as well as economic growth in the country. The offered technique can be used with success in formation of the state tax policy of many countries, in particular, of the former Soviet Union countries (e.g. Ukraine, Russia, Belarus, etc.).
Authors and Affiliations
Mayis Gulaliyev
Keywords
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