Mutual impact of personal income tax and macroeconomic indicators

Abstract

From mid-2006 to the end of 2008, numerous decisions were adopted in the public finances of the Republic of Serbia, which resulted in a permanent reduction in tax revenues and in increase of public expenditures. It creates a systemic imbalance between government revenue and expenditure, that is, the fiscal deficit. The emergence of the fiscal deficit is the main motive of the conducted research, where by using a simple regression analysis of the time series of macroeconomic data, authors linked the indicators of economic growth and personal income tax. The results of the research indicate the importance of the influence of personal income tax on the creation of a favorable macroeconomic environment, where the regulation and reform of the existing tax system are imposed as imperatives.