Macroeconomic impacts of tax policies: The case of OECD countries

Taxes, as old as human history, have an important share in the financing of public expenditures today. Taxes, collected under the monopoly of states, were only public revenues until the Great Depression of 1929, but after 1929 they became an effective instrument of fiscal policy. The duties imposed on them have increased with the economic movements that have emerged over time and taxes have become an important stabilization policy tool in the course of the economic conjuncture. Although the utilization of taxes for fiscal and non-fiscal purposes varies from country to country, the fact that they play an indispensable role in the global economy is recognized by all countries. Eventually, some countries prefer indirect taxes while others prefer direct taxes, or the distribution of taxes on income, wealth, and expenditures, which constitute as the subject matter of it, may differ. However, these differences have never modified the significance of taxes for governments. Within the scope of the study, firstly, the emergence and evolution of taxes are discussed and then the role of taxes in the framework of economic ideas is analyzed. The prominence of taxation in some economic ideas and its assuming an important role has become more effective, especially with the great depression of 1929 and the dominance of Keynesian thought. In the second chapter, which discusses the classification of taxes within the scope of OECD countries, taxes are categorized as direct and indirect taxes and taxes on income, wealth, and expenditures. As observed by the classification, it has been determined that whether the countries have a well-functioning, simple, and clear tax infrastructure that does not change frequently and has sufficient and qualified personnel, whether the tax is distributed fairly or not, and whether tax awareness is established or not have a significant impact on tax revenues. The last chapter analyzes the impact of tax policies on certain macroeconomic variables in OECD countries. In this research, panel data analysis was adopted, and the dependent variable was tax revenues, whereas the independent variables were unemployment, inflation, national income per capita, the balance of trade, and foreign direct investments. Given the data limitations, indicators for 33 OECD countries between 1995 and 2019 are included in the analysis, and the relationship between tax revenues and each independent variable is analyzed individually. In conclusion, no meaningful correlation was found between tax revenues, which represent the dependent variable, and any of the independent variables across the 33 OECD member countries.