Nowadays the most important debate in macroeconomics is the mode of the association between government expenditure and government revenues. Recently, the question has been prominent with rising government budget deficits in developing countries where government expenditure plays a vital part of an economy. Government expenditure is the engine of economic development in every sector of the economy and enhances the standard of living of the masses. Since last few years in Romania, there is a significant increase in government expenditure around 6 percent of GDP while a percentage of government revenue remains constant around at 35 percent, thus the management of budget deficit is the major challenge for the government of Romania. On the revenue side, there is a need to be addressed tax administration system and tax reforms, while on the expenditure side there is a need to be addressed inadequacy in public expenditures.