ISSN 2411-9571 (Print) ISSN 2411-4073 (online) European Journal of Economics and Business Studies January-April 2016 Volume 2, Issue 1 79 The Role of Taxes in Economic Development of Kosovo Artan Nimani artannimani@gmail. com Kolegji Biznesi Gjakovë, Kosovë Abstract To achieve prosperity and political stability, national governments aimed at achieving economic equilibrium. The government uses various instruments to stimulate economic growth, reduce unemployment and to achieve macroeconomic objectives. In the context of slow economic growth in recent years and fiscal pressures, Kosovo faces the complex challenge of economic development. Unemployment remains at a high level. Demand for labor is still very low and create an environment that will favor the formation of stable work places is a challenging task that requires a multidimensional reforms in the economy. This paper addresses the impact of fiscal policy on reducing unemployment, increasing investment and consumption to generate sustainable economic growth. Keywords: fiscal policy, unemployment, investment, consumption, economic growth. Introduction Kosovo is one of the last countries in Europe to switch to a market economy. The transition process started from a very difficult starting point. Kosovo has a long history of state domination of economic and financial systems, which led to a degree, volume and limited experience of the private economy. During the years after the war, an economic growth of symbolic character, which have been attributed mainly remittances, investment in infrastructure and privatization. Investment, despite continued growth, deemed insufficient to boost domestic production. This pattern of growth has not been able to meet the development needs of the state and failed to dismantle the better standard of living for citizens considering that unemployment or poverty or are not reduced. (Progress Report on Kosovo, European Commission 2011) However, Kosovo needs to significantly accelerate its growth to reach regional income levels. According to World Bank estimates 18, Kosovo's economy should have increased by 10 percent per year for a decade in order to reach the level of earnings Albania, always claiming that Albania's economy continues to growth of 5. 5 percent on an annual basis during this period. 1 SHORT PRESENTATION OF FISCAL POLICY Fiscal policy consists in the use of taxes and government spending as a means to influence the macroeconomic indicators of the country. Government spending affect the overall level of spending economy, including the level of GDP and consequently the level of employment, inflation, etc. Fiscal policy affects directly or indirectly in the domestic economy. Decisions taken in fiscal policy are not easy because changing one variable can change cause other variables and takes the wrong direction, so fiscal policy is regarded as a complex area which is necessary to analyze in detail. The tax system in Kosovo is faced with ideas on various challenges. Free to highlight any specific problem within the system, some of the flaws are quite evident and do not require significant input to resolve. 1 World Bank, Doing Business Report / 2013