The evaluation of exception and exemption practices in terms of fiscal goal of taxation in Turkish tax system

ABSTRACT The purposes of taxation goes parallel with the development of goverment duties. In terms of go verment duties, classical approach has asserted that taxes should be impartial and should only be imposed to cover up goverment expenditures. According to classical goverment approach, taxes only ought to be imposed for fiscal purposes in order to meet goverment expenditures. On the other hand, welfare state approach argues that the aim of taxation should not only be fiscal targets but also be social and economic ones. As a result of this last perspective, while the ratio of tax revenues to gross national product was between 5 to 15 percent at the beginning of 20th century, it has increased gradually after 1930's and has finally reached at the level of 25-40 percent. This fact means that almost half of national product (providing benefiting from expenditures as well) redistributed by means of taxation. Taking all of the above considerations into account, taxation has been a powerful tool for goverments to regulate social and economic life in 20th century. Goverments allocate social benefits and costs among individuals through goverment expenditures, public incomes and tax expenditures. In most countries, while goverment expenditures have been recorded throughout budget process, a different policy shows up in tax expenditures practice. Some countries, as in goverment expenditures recording, apply the same policy to tax expenditures via budget process. And some countries have been recording tax expenditures even if they are out of budget process. Furthermore, in some countries nothing has been done regarding recording and documentation. Thus, the benefits and costs of tax expenditures remain vague. Turkey, falls into the last group of this categorization. This results in that evaluation of data regarding tax expenditures remains untouched. In this study, tax exemption and tax exception which constitute the most important portion of tax expenditures carried out in our country, are examined. Firstly, corporate, value added and income taxes which consist of third-fourth of tax revenues in Turkish tax system, are studied. The tax exemptions and tax exceptions which consist of the most important of tax expenditures in corparate, value added and income taxes are analyzed in terms of the purposes of their application, execution periods and who could benefit from these policies. By benefiting tax return abstracts across Turkey, applicaple tax expenditures have been calculated. Lastly, the impacts of tax expenditures on fiscal goal of taxation have been analyzed. m