The Impact of Taxation on Economic Growth in Romania

For testing the taxation impact on the economical growth, I was propose Barro and Sala-i-Martin model (1995), the classification of budgetary income according to the distorsionary character of these ones. This classification of budgetary income allows the analysis of the influence of each category on the economical growth, the theoretical models offering arguments and explanations for the negative effects of distorted fiscal income and insignificant effects of non-distorted fiscal income and of other income. On the other side the destination of these taxes should not be ignored, thus per global the negative effect induced in economy by taxation can be annulled/nullified by the consequences favourable to their use in the realization of budgetary productive expenses. If Ricardian equivalence are not met, the deficit has negative impact on growth because it reduces savings, and hence capital accumulation, Tanzi, Zee (1997) argues that the deficit is perceived to be unsustainable, then changes in fiscal policy, budgetary, monetary policy will be anticipated, thereby decreasing the effect on investment growth from rising inflation and the uncertainties associated with the anticipated tax policy changes Additionally, remaining at theoretical level, we consider that the most likely ways in which taxation affects economic growth are those designed to impact on saving and investment. The evidence suggests that taxes have not a major impact on the average level of savings, but affects the allocation of savings, assuming that not all forms of savings are taxed in a uniform manner (financial investments/real). As regards the impact on investment, taxes affect the cost of capital, which in turn affects investment decision. In developed countries, the tax effects on investment are minimal having a stronger role for political stability; tax has a greater impact on the structure of investment and less on their level. In conclusion, even if all budgetary expenditures should be productive distorting tax financing may generate negative effects on growth, if their level is high enough. Generally, the conclusions regarding the impact of the fiscal policy on the growth are contradictory, which can be the consequences of the fact that different fiscal political instruments can lead to opposed effects on the growth: on the one hand, a larger implication of the public sector in economy aspires to promote the growth (directly, by the aggregate production function and indirectly by the effects on the private sector productivity), but, on the other hand, the high taxation affects negatively the growth.