The functions reflect the economic nature of taxes. This happens as a result of the fact that the tax system in the state, their combined value, demonstrate the degree to which the potential of this tool for the distribution and redistribution of social wealth is realized.
Depending on what types of taxes and fees have been adopted in the state, one can talk about the functions that they perform in society. In addition, economic theory itself is not yet able to answer the question about the functions performed by taxes and what they should ideally fulfill, what their types and sizes should be.
The most established opinion is now considered that taxes will most effectively fulfill two functions, this is the fiscal function of taxes and distribution.
The first, fiscal, tax function is one of the most important, and not only because it is implemented in an overwhelming number of states. Its universality lies in the fact that it is not mediated by any socio-economic system of the state and its economic system.
Using this function, financial funds and reserves of any country are created, and it is the fiscal function of taxes that creates the necessary conditions for the redistribution of social wealth between various social and economic groups of the population, business entities, and economic sectors.
As you know, any change in the amount of tax revenue significantly affects economic activity. Moreover, here we have in mind not only a decrease in these revenues, but also their increase, since in this case social tension in society can intensify. Therefore, it is extremely important to achieve a state of affairs in which the redistribution of social wealth on the principles of economic feasibility will be ensured . The fulfillment of this condition allows us to ensure a combination of state and public interests at the level of acceptable for both parties. The conclusion is drawn from this, according to which it becomes objectively necessary that the fiscal function of taxes be supplemented by a regulatory, or, as it is also called, distributive.
The nature of the distribution mechanism was known even at the stage of primary accumulation of capital. Its current, contemporary content has changed significantly. At the moment, the distribution function of taxes acts as a necessary and effective tool to stimulate the production process, its technological re-equipment, maintain optimal rates.
The use of taxes as a method of generating state funds objectively necessitates the need for the tax process to come into contact with its participants — enterprises, companies, and the public. In the process of this contact, the role of the distribution function increases even more. If during the period of capital accumulation, taxes mainly took part in the creation of production as such, then at the present stage, taxes are increasingly manifesting themselves as a regulatory tool. The action of this tool is implemented through the types of taxes and fees, the establishment of tax rates, the provision of preferences and benefits, the application of sanctions to various participants in economic relations. This shows that tax policy directly intervenes in the process of economic relations in society. By the way, another function follows from here - the control function, the essence of which follows from the very nature of such a phenomenon as taxes. The redistribution of the social product through taxes in this case is inseparable from monitoring the movement of financial resources in the economy.
Ultimately, summarizing all the functions that taxes carry out, it should be recognized that they are designed to ensure a balance between state and public interests and create favorable conditions for progress.