Economic Freedom Under Fiscal Control

Abstract

This paper explores the relationship between economic freedom especially in the field of tax policy and the political institutions as well. Therefore, the objective of this paper is to answer the following questions: (1) What are the limits of the power of taxation in the modern world? and (2) Is the nature of tax policy a result of the requirements of the economy or the consequence of the policy that is conducted inefficiently? In an attempt to answer these questions the level of the effectiveness of the tax burden and the level of the economic freedom not only in Poland were assessed. Such an assessment has been based on the research conducted by international organizations and national institutions. Polish solutions in this context seem to be particularly important due to the fact that Poland is regarded as the leading economy in the Central and Eastern Europe. On a global scale, especially among the Organization for Economic Cooperation and Development (OECD) countries, a positive trend towards a gradual reduction of the level of the tax burden can be observed. However it should be noted that the taxation is not only the rate, but also the different solutions including the provisions of taxes and administrative environment, which prove the quality of the tax system. While in the case of Poland, the tax rates are at a very favorable level, the other elements (like bureaucracy, transfer pricing regulations, value added tax (VAT) accounting, and taxpayer duties), are regarded as unfriendly. Unfortunately, such an assessment of the tax system is one of the causes of the escape from the taxation into the shadow economy. The article is divided into several parts including the case studies that show the importance of the economic freedom, especially the taxation, as well as global trends in the taxation and its potential consequences in the field of the economic freedom. The last part focuses on the problem of the economic freedom in Poland and the estimation of the Polish tax system from the point of view of Polish entrepreneurs in the years 2001-2013.