The Importance of Fiscal Illusion in Public Choice

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