Indirect tax and direct tax revenues relations with the economic growth: The case of Turkey

Taxes are used as an effective fiscal policy instrument in achieving economic growth, which is among the main goals of the state. The effect of tax revenues on economic growth has been an important research topic in the literature for a long time. In this study, the effect of indirect tax and direct tax revenues on economic growth in Turkey has been analyzed theoretically and empirically. The quarterly data set for the period 2006:1-2023:2 was used in the study. The cointegration relationship between the variables was examined with the bound test developed by Pesaran et al. (2001). The ARDL model was established for the purpose of studying long and short-term relationships. Toda-Yamamoto causality test was applied to determine the direction of causality relationship between variables. According to the results of the analysis, it was concluded that there is a cointegration relationship between indirect tax, direct tax revenues and economic growth. It has been found that indirect tax revenues have a statistically significant and positive impact on economic growth in the long term, while direct tax revenues have a statistically significant and negative impact on economic growth. In the short term, it has been found that direct tax revenues have a statistically significant and positive impact on economic growth. The impact of indirect taxes on economic growth has not been determined. According to the results of the Toda-Yamamoto causality test, a bidirectional causality relationship was detected both between indirect taxes and economic growth and between direct taxes and economic growth.