Fiscal Policy in Transition Economies

Sustainable public finance as a measure of successful transition 1

Authored by: Anna Shabunina

Handbook of the Economics and Political Economy of Transition

Print publication date:  April  2013
Online publication date:  May  2013

Print ISBN: 9780415591126
eBook ISBN: 9780203067901
Adobe ISBN: 9781135080877


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Planned economies neither had nor needed either comprehensive fiscal policy or strong fiscal institutions. The share of the private sector was small and official unemployment did not exist, since government enterprises often employed more people than they needed. Strict tax rules or consistently applied tax codes were rarely in place. Often the governments negotiated tax payments with large enterprises and used the resulting revenue stream to redistribute resources between government-owned entities. Tax administration was easy since the exact information on prices and output was available, and a small number of large entities usually made their transactions via the single state-owned bank. Explicit taxes on individuals did not exist (Tanzi, 1992).

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