A Critical Assessment of Fiscal Policy and Impact on Economic Growth. Albanian and Transition Economies Case

The main focus of this paper is making a critical assessment of possible links that exists between public finance policies and growth during transition period in Albania. Based on panel data technique is tested the impact of government size and the effect of budget deficit in economic growth. On revenue side of public finance are done important reform, such as the introduction of VAT and flat taxes for both personal income tax and corporate income tax. A common trend in the last years has been substantial deduction of corporate income tax. Based on taxation theory are also analyzed, the main determinants of tax performance in selected transition economies. The main findings of this work are that both government size and fiscal deficit are important factors that influence growth performance. The study has found support for negative impact on growth of government size in transition economies. In tax performance evaluation for transition economies, GDP per capita, share of agriculture and share of industry have the expected impact in accordance with tax literature and previous studies. Total government expenditure has a positive impact in tax collection. Shadow economy is important for tax performance; therefore in order for the government to increase tax revenue, the tax evasion should be reduced.