The Strategic Function of Tax Policy in Economic and Social Development

Abstract

Taxation plays a strategic role as a principal instrument of fiscal policy to achieve both economic and social development goals. Through tax revenues, governments are able to finance the provision of public services, infrastructure development, and redistribute income to reduce economic inequality. Beyond serving as a source of revenue, taxes function as a regulatory tool to influence economic behavior, promote sustainable investment, and strengthen macroeconomic stability. Nevertheless, the effectiveness of the tax system in enhancing social welfare remains influenced by the level of transparency, administrative efficiency, and taxpayer compliance. This study employs a descriptive qualitative approach to explain the relationship between tax policy and social welfare, while also examining the factors determining the optimal role of taxation in economic development. The findings indicate that the success of tax policy largely depends on the fairness of tax burden distribution, the efficiency of fiscal management, and the government’s ability to return tax benefits to society through effective public programs.