Abstract
The fiscal policy plays a crucial role in a country's economic growth and development. The main aim of this paper is to analyze the fiscal policy in general and to estimate the impact of direct and indirect taxes on economic growth in particular in case of Kosovo. To achieve the main aim of this paper a broadly national and international literature is reviewed and discussed thus the Pearson Correlation and Ordinary Least Square (OLS) regression model have been modified and adapted to estimate the relationship and the impact of direct and indirect taxes on economic growth in Kosovo. The data used is secondary data taken from the Tax Administration of Kosovo, the Ministry of Finance and the Kosovo Agency of Statistics. For model estimation the IBM SPSS program is used. This study concludes that budget revenues from direct and indirect taxes mark an increasing and positive trend in case of Kosovo. Based on the Pearson Correlations we conclude that direct taxes are strongly and positively correlated to Gross Domestic Product however the results of OLS regression in our circumstances show no significance of the independent variables that means that direct and indirect taxes have no impact on economic growth of Kosovo. The paper comes with some key conclusions and further recommendations.
Highlights
The goals of tax policy are usually to provide a fair, efficient and predictable way of financing government spending
In the section four we present trend of Gross Domestic Product (GDP) in case of Kosovo giving so the answer how tax system affects economic growth via Pearson Correlation and Ordinary Least Square (OLS) model
The tax system should not distort the principle of efficiency which is seen as the basic principle of a tax system
Summary
The goals of tax policy are usually to provide a fair, efficient and predictable way of financing government spending. To achieve these multiple objectives, policymakers choose a tax mix. With the adoption of a new fiscal rule, the purpose of which was to ensure that Kosovo's fiscal deficit and public debt are maintained at stable levels in the future. During this time period (2008-2013), public expenditures were strongly focused on capital expenditures which were focused on investments in infrastructure projects, which helped to support economic growth
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