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An evaluation of indirect taxes in Turkey

Author

Listed:
  • Oya Pinar Ardic

    (Bogazici University)

  • Burcay Erus

    (Bogazici University)

  • Gurcan Soydan

    (T. İş Bankası Commercial Marketing Department)

Abstract

The share of indirect taxes in tax revenues, specifically consumption taxes, is quite high in Turkey when compared to other OECD economies. This emphasis on indirect taxes in Turkey, as well as other developing economies, is argued to emerge from the inability of the government to collect direct taxes because of the existence of a large informal sector that is not easily taxable. It has been suggested that the recent increase in the indirect taxes puts the burden on mostly the poor, raising concerns of inequality. This paper evaluates the efficiency of the current indirect taxes in Turkey by taking into account distributional concerns. Using data from the 2003 Household Budget Survey, we estimate elasticities of different consumption goods and services using AIDS method. We then perform a marginal tax reform analysis to assess the efficiency of indirect taxes. Our findings indicate that there is room for improvement and the current tax rates are not optimal.

Suggested Citation

  • Oya Pinar Ardic & Burcay Erus & Gurcan Soydan, 2010. "An evaluation of indirect taxes in Turkey," Economics Bulletin, AccessEcon, vol. 30(4), pages 2787-2801.
    • Handle: RePEc:ebl:ecbull:eb-10-00008
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Murat Üngör, 2014. "Average effective tax rates on consumption for Turkey: New data and a comparative analysis," Economics Bulletin, AccessEcon, vol. 34(1), pages 567-580.
    2. World Bank, 2014. "Turkey Public Finance Review : Turkey in Transition--Time for a Fiscal Policy Pivot?," World Bank Publications - Reports 19321, The World Bank Group.
    3. Daniela Penu, 2016. "Indirect Taxes in Romania – an Econometric Analysis," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 2(1), pages 121-128, March.

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    More about this item

    Keywords

    Indirect taxes; Household survey; Marginal tax reform; AIDS estimation;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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