The relationship between institutional structure and tax revenues: An analysis on OECD countries

From past to present, taxes have been seen as an important tool in achieving some economic and social goals, as well as being a source of income. Due to the fact that taxes are so important, the factors affecting taxes attract a lot of attention. Institutional structure is another concept that has attracted attention recently. The fact that institutional structure is an important concept that ensures social order has revealed views that it can affect the financial and economic values of the country. A good institutional structure can help to increase tax revenues by increasing the confidence in the country's conditions in society, investment decisions, economic activities and tax compliance. The aim of the studyis to examine the relationship between institutional structure and tax revenues in the OECD countries between 2006 and 2021. In this regard, Westerlund (2007) the cointegration test and Dumitrescu and Hurlin (2012) causality tests were used in the study. Democracy, corruption and economic freedom indices were used as indicators of institutional structure. As a result of the analyses, a long-term relationship between institutional structure and tax revenues has been determined. As a result of the Dumitrescu and Hurlin (2012) test, it was determined that there is a significant and bidirectional causality between institutional structure and tax revenues.