TAX POLICY AND ITS MANAGEMENT MECHANISMS IN THE ECONOMIC DEVELOPMENT OF AZERBAIJAN

Abstract

Tax policy and its management mechanisms play a decisive role in the economic development of any country and in the stable financing of the state budget. In recent years, the main goal of tax reforms implemented in Azerbaijan has been to increase the state’s fiscal potential, optimize the tax burden of taxpayers, the size of the shadow economy, and ensure transparency. This articleevaluates the factors affecting the country's tax potential based on theoretical approaches and econometric analysis methods. The results of the study show that the optimization of tax rates has created favorable conditions for the more efficient implementation of fiscal policy, while digitalization measures have strengthened transparency in administration and enhanced taxpayers’ responsibility. In particular, the introduction of online cash registers, electronic invoices, and unified tax information databases, as well as the facilitation of data exchange among government agencies, has significantly strengthened fiscal discipline. The research also reveals that despite the progress achieved, there is still a considerable tax gap in the country. Empirical analysis proves that the reforms implemented have a positive short-term impact on state budget revenues and increase tax collection. In the long-term perspective, these measures contribute to the expansion of the tax base and strengthen the country’s economic resilience. Thus, modern reforms play a crucial role in improving fiscal efficiency and creating conditions for sustainable economic development. The article concludes that additional measures are necessary to fully realize Azerbaijan’s tax potential. First, it is essential to simplify tax legislation and eliminate inconsistencies. The second important direction 
is to reduce unjustified and inefficient tax exemptions, which will ensure tax equity and the principle of fairness. The study demonstrates that tax reforms have been an important factor in strengthening Azerbaijan’s fiscal potential, and with continued progress in this area, more favorable opportunities will emerge for the country’s economic growth and budget stability.