Abstract: The subject of this research is the fiscal system of Algeria, namely the principles and methods of formation of consolidated budget of the country and the role of tax revenue in development of market economy. The author describes the factors that influence the country’s fiscal system, as well as highlights the priority conditions for economic development of Algeria. The goal of this work consists in formulation of recommendations on improvement of the processes of budgeting and state tax planning in Algeria, as well as on overcoming the problems of a resource-oriented and state-regulated economy. The methodological framework contains the principles and methods of factor analysis that reveal the external and internal causes of establishment of the modern fiscal system in Algeria, mathematical methods of horizontal and vertical data analysis of consolidated budget; methods of induction and modeling in advancing proposals on the development of Algeria’s fiscal system. The novelty of this work lies in the suggestions on diversification of the economy by reducing the share of the oil and gas sector and sequestering budget deficit by reducing military spending, as well as shifting budget tax revenue towards direct taxes. The results of the research demonstrate the democratic model of fiscal system in Algeria, oriented towards market economy.