Taxes and Its Objectives The main objective of tax policy is to encourage permanent economic growth. Many countries suffer from a combination of budget deficit crisis and domestic financial instability. Fiscal policy plays a key role in reducing in the size of the budget deficit. However, the way the deficit is reduced--the quality of fiscal adjustment--can also affect growth. Since some aspects of government expenditure are more productive than others, some tax reforms more beneficial in their impact on economic growth than others. The range of change in the fiscal balance is easy to measure. An efficient and effec