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Effect of Tax Administration Reform and Audits on Tax Evasion in Turkey

Author

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  • Nagac Kadir

    (Department of Economics, Zirve Universtiy, Gaziantep/Turkey)

Abstract

In recent years, many developing countries have carried out reforms in their tax administration to increase their effciency in collecting taxes. In 2005, the tax authority in Turkey established Tax Offce Directorates (TODs) in 29 provinces for the purpose of controlling the underground economy, improving taxpayer assistance, and increasing auditing effciency. By using the panel data on province-level tax returns, my analysis answers two questions. First, I examine the effect of audits on reported income and reported tax liability. By controlling for the detectability of evasion and other socioeconomic variables, I find that audits have the same effectiveness in increasing reported income and reported tax liability. Second, I investigate the effect of establishing TODs in 29 provinces on compliance in those provinces. I find that establishing TODs had no significant effect on the compliance level of existing taxpayers while it increased the number of tax returns significantly.

Suggested Citation

  • Nagac Kadir, 2013. "Effect of Tax Administration Reform and Audits on Tax Evasion in Turkey," Review of Middle East Economics and Finance, De Gruyter, vol. 8(3), pages 1-23, January.
    • Handle: RePEc:bpj:rmeecf:v:8:y:2013:i:3:p:1-23:n:4
    DOI: 10.1515/rmeef-2012-0046
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    References listed on IDEAS

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