Numerical Fiscal Rules Precursor Of Fiscal Performance

Tax rules and other institutional and economic factors can, in principle, either exacerbate or mitigate the procyclicality of tax policy. In the wake of the global financial crisis, the sustainability of public finances has become one of the most important issues in Europe. Diverging fiscal circumstances in European countries reflect the outcome of their economic performance and fiscal institutions. In the past decades, many European countries have introduced fiscal rules and set up independent fiscal agencies to strengthen their budget, process and improve their fiscal performance. (Roch et al., 2021). However, the design and features of the rules varied significantly across countries. A growing number of countries have improved the legal basis of their national tax rules (statutory level or above) and many of them have also introduced formal enforcement mechanisms. At the same time, over the last decade, the share of countries with cyclically adjusted tax rules has declined, probably reflecting significant operational challenges.