Regional net fiscal incidence analysis based on tax apportionment in Turkey

The fact that the tax is not paid in the place of origin is an obstacle to the calculation of the real regional tax burden. The tax revenues of a company operating in many regions are paid only in the province where its headquarter is located. Real regional tax burden is calculated by tax apportionment method, even if the tax is not paid in the place of origin in some countries such as the USA and Canada. In this study, a tax apportionment model is developed for income tax, corporate tax, value added tax and special consumption tax on cigarettes in Turkey. In the study, 2019 data of 81 provinces are used. The coefficients of the variables found to be significant in the regression analysis using cross-sectional data are used as weights. Real tax burden for 81 provinces is estimated by using tax apportionment. The regional net fiscal incidence is calculated by deducting the calculated tax revenues of the provinces from the public expenditures. Based on the findings of tax apportionment analysis, it could be suggested that the imbalance between the tax burden of provinces decreased. The findings show that the difference between the province with the highest tax revenue per capita and the lowest province was 109 times, while this figure was approximately 3 times after tax apportionment. In income tax, the difference between the province with the highest tax income and the province with the lowest tax income according to tax collection is 16 times, while this difference decreased to about 4 times after tax apportionment. In corporate tax, this difference was 181 times, it was realized as 8 times after tax apportionment. In VAT application, according to tax collection the difference between the province with the highest tax income and the lowest is realized as 861 times, this difference was about 3 after tax apportionment. According to the findings of the net fiscal incidence analysis, while tax revenues are more than public expenditures in 10 provinces, this figure increased to 43 provinces after tax apportionment. According to the findings, it is observed that there is convergence between the provinces after the tax apportionment. Keywords: Tax apportionment, regional tax burden, regional net fiscal incidence.