EARMARKING OF TAXES: ECONOMY OR POLICY?
EARMARKING OF TAXES: ECONOMY OR POLICY?

Summary/Abstract: One of the topical issues for the governments is financing of the state expenditures in conditions of scarcity. The governments search for possibilities to increase efficiency of expenditures financing. One of the methods is the earmarking of taxes which means attracting any tax or a part of it to the particular needs of the society. In the world practice and financial science, there are contradictory views and conclusions about the earmarking of taxes application. The author investigates theoretical aspects of the earmarking of taxes from the point of different groups of motivators: government, politicians, taxpayers, and from the perspective of financial experts. In the research, the pros and cons of the earmarking of taxes have been weighed up and meanwhile the political nature and the main risks are indicated in the conditions of changing economy. Investigating experience of the taxes earmarking in Latvia in the period of crisis and weighing up the latest trends in the tax policy, the author recommends to analyse the meaning of the future earmarking of taxes in connection with the ensurance of the sustainable state fiscal policy and to make thorough economic calculations in order to avoid the political influence on the fiscal decisions.

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