Distributive and fiscal function of taxes

Functions reflect the economic nature of taxes. This is due to the fact that the system of taxes in the state, their aggregate value, demonstrates the degree of realization of the potential of this instrument of distribution and redistribution of social wealth.

Depending on what kind of taxes and fees are accepted in the state, one can also talk about the functions that they perform in the society. Moreover, the economic theory itself is not yet able to give an answer to the question of the functions performed by taxes and what they should fulfill in an ideal, what should be their types and sizes.

The most established opinion now is that taxes will most effectively fulfill two functions, this is the fiscal function of taxes and the distribution one.

The first, fiscal, function of taxes is one of the most important, and not only because it is realized in the vast majority of states. Its universality lies in the fact that it is not mediated by any socio-economic system of the state and its economic system.

With the help of this function, financial funds and reserves of any country are created, and it is the fiscal function of taxes that forms the necessary conditions for the redistribution of social wealth between different social and economic groups of the population, economic entities, economic sectors.

As you know, any change in the amount of tax revenue significantly affects economic activity. Moreover, here we mean not only a reduction in these revenues, but also an increase in them, since in this case social tension in society can increase. Therefore, it is extremely important to achieve such a state of things, in which redistribution of social wealth on the principles of economic expediency will be ensured . The fulfillment of this condition allows ensuring a combination of state and public interests at the level of acceptable for both sides. Hence, a conclusion is drawn, according to which it becomes objectively necessary that the fiscal function of taxes be supplemented by a regulatory, or, as it is also called, distributive.

The nature of the distribution mechanism was known even at the stage of primary capital accumulation. The present, modern content of it has largely changed. At the moment, the distribution function of taxes is a necessary and effective tool to stimulate the production process, its technological re-equipment, maintaining the optimal pace.

The use of taxes as a method of forming state funds objectively causes the need for the tax process to come into contact with its participants - enterprises, companies, the population. In the process of this contact, the role of the distribution function is even greater. If during the period of capital accumulation, taxes were mainly involved in the creation of production as such, at the present stage, taxes are increasingly manifesting themselves as a regulatory tool. The effect of this instrument is realized through types of taxes and fees, the establishment of tax rates, the provision of preferences and benefits, the application of sanctions to various participants in economic relations. This shows that the tax policy directly interferes with the process of economic relations in society. By the way, another function, control, follows from this, the essence of which derives from the very nature of such a phenomenon as taxes. The redistribution of the social product through taxes in this case is inseparable from tracking the movement of financial resources in the economy.

Ultimately, by summarizing all the functions that taxes perform, one must recognize that they are called upon to ensure a balance between state and public interests and to create favorable conditions for progress.