Introduction

This chapter provides a commentary on the economic effects of taxation policies, drawn partly from the institutional perspective, and partly from the economic theory of public finance. The analysis is generally based on a short-run, partial equilibrium nature, and provides some useful theoretical insights into the role of taxation in a socialist economy. The chapter discusses a substantial difference between the role of taxation in a 'command' economy, and its role in economic reforms. This difference had to be incorporated into general perspective on the role of taxation in a socialist economy. The chapter seeks to develop a theory of economic reform as organisational change, and provide explanations of the economic forces leading to reforms, and of the economic causes of the frequent failure of reforms. The chapter argues the case for central planning on efficiency grounds, rather than proclaiming its general inefficiency, as some commentators have done.