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Fiscal Policy through Taxation Report (Assessment)

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Updated: Nov 25th, 2021

Fiscal policy is a tool that defines government involvement in the economic setup of a nation. It involves government spending and the revenue earned through taxation. Fiscal policy is generally defined by a budget that is given at the beginning of a financial year in most countries.

European Fiscal Policy

European fiscal policy has varied according to a variety of economic circumstances. There is also some variation in fiscal policy depending on the geographical region we are referring to. For example, eastern European nations with roots in communist dictatorial economies tend to have more state intervention when compared to Western European nations. Generally, however, European fiscal policy has been such that it allows for greater state intervention in policymaking. One of the major external factors that have been influencing the development of policy in Europe is the establishment of the European Commission. The establishment of one currency means that a standard European monetary policy is influenced by differing fiscal policies/ While countries generally tighten budgets to get included in the Commission they loosen up after becoming part of it. Recently the crisis means that most European countries are running large fiscal deficits.

American Fiscal Policy

American fiscal policy has come under a lot of discussion and consideration especially lately, because of issues such as the health policy and the war on terror. The health policy, because will define government spending and tax collection, and the war on terror because it has made significant contributions to the American national debt. One of the major concerns of the American economy has been the huge fiscal deficit that it is running. This has become worse when a financial crisis forced the government to bail out many major financial institutions and collect fewer tax revenues overall.

Asian Fiscal Policy

The Asian economy consists of three major giants, Indian, Chinese, and Japanese. The Japanese government has always spent less than governments of other developed economies, however since the financial crisis in the 1990’s Japanese has always looked to further reduce its fiscal deficit. India struggles with a high budget, but with less spending on factors like health and education. This is true for many counties in Asia, who are struggling with high budget deficits but are still unable to provide basic amenities to their people. Proper tax collection also remains an issue. China’s fiscal policy reflects its strong communist background.

Comparison between various fiscal policies

If we examine the differences between each of these regions we can see that one of the most prominent factors is the rising budget deficits in all of these economies. This is due to the problems with the global economy however the American budget deficit remains the highest. Another difference specifically between European and American fiscal policies is that Europeans spend a larger part of their budget on health. France’s government runs a more extensive health coverage system than America. Also traditionally the Wealth Tax has been high in Europe but this is now changing and it is coming down to the relatively lower levels that exist in America. Generally developed economies run smaller budget deficits however the financial crisis has rendered this untrue. Also in America and Europe, the financial crisis has made governments reevaluate their role and the role of regulatory bodies. This changing perception has reflected in and will reflect in future fiscal policies.

Work Cited

American budget deficit tops $1 trillion Beta News, 2009. Web.

Capannelli Giovani ‘Asian Regionalism: How does it compare with Europe?’ VOX 2009. Web.

Doppler Micheal ‘How to Help European Fiscal Policy’ International Monetary Fund, 2004. Web.

McKinnon Ronald ‘China’s exchange rate policy is the quid pro quo for fiscal expansion’ financial times. 2009. Web.

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IvyPanda. (2021) 'Fiscal Policy through Taxation'. 25 November.

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