Abstract:

Principles of effectiveness and fairness are not often considered as complemented in economic theory. Regarding the tax systems there is no difference and situation appears to be more ambiguous. Hence, this contribution focuses on relation between tax fairness and tax effectiveness. The dynamic panel model of OECD countries in the period from 2000 to 2012 is employed. Taxes fairness is based on two approaches. The first one is the ability-to-pay principle and the second one is the benefit principle. The results suggest that governments should reconsider their attitude to more mainstream tax fairness principle which is the ability-to-pay. Especially left-wing European parties, which often deny benefit principle to be fair, should do so. On the other hand, more liberal approach to tax fairness appears to increase the tax effectiveness and the economic growth.