First, the need to reduce the risk of fiscal policy externalities; additionally, the need to gain flexibility and adaptability; and finally, the importance of ensuring proper incentives. Sound fiscal policies allow for flexibility, which cushions the effects of the economic cycle through the working of automatic stabilisers.
Additionally, sound fiscal  BIS Review 64/2006  7  policies create room for domestic economic management, say, to pursue the desired tax and spending policies. Furthermore, the tax and benefit system should avoid major distortions affecting incentives to work, save, invest and innovate. This creates conditions conducive to stability and sustainable growth.