The Importance of Fiscal Illusion in Public Choice

This article intends to stress out a fiscal matter, firstly explored by Puviani, known as fiscal illusion. This a case of observing and reacting upon key fiscal parameters, which could ultimately impose distortion of fiscal choices made by the electorate. There are numerous elements like tax structure, public expenditure, that are largely concealed so the voters don’t have the true information about the cost of providing certain public services. In the countries with high public expenditure there is a high rate of indirect taxes present, because they obscure the tax payer perception about the amount of tax paid. This is how they gather larger amount of tax revenues which are used for financing public sector. The high percentage of indirect taxes in public revenues affects the demand for public services, because the benefits are clear as day but not their expenses. That kind of misperception of public sector expenditures upon existence of indirect taxes is clear example of fiscal illusion. If the level of fiscal illusion is high, then the citizens are not in position to clearly see the government expenses which complicates the control of public money usage. The stimulus for money control is lower, because expenses are considered lower then they really are