Incentive policies as a fiscal policy instruments and evaluation of the Turkish incentive system

Governments effectively use incentive policies as a financial policy in order to increase production, export and employment; and to prevent the sharp decline of these indicators especially during economic contraction periods. In the current globalized world where international competition gained huge strength, with this aspect incentive policies have great importance. Incentive policies have the functions of ensuring economic growth and development through increase in production, gaining more shares from the world trade volume by increasing the competitiveness of the country and therefore reducing the foreign trade deficit, struggling the regional imbalance problem and providing increase in employment. Incentive System applied in Turkey has undergone major changes in 2012 with Decisions of the Council of Ministers. This new incentive system; consists of multiple mechanisms for investment incentives, the supports given to SMEs are mainly implemented through project-based support mechanisms within the constitution of KOSGEB and the Ministry of Commerce. Within the scope of the new incentive system, regional and sector-based practices are distinguished, priority regions and sectors are supported by incentive mechanisms with increased proportion. In this manner, positive discrimination is applied to the regions and sectors that the government wants to be developed. However, as it is seen from the support mechanisms, alike supports are implemented by different institutions, additionally due to the fact vii of large number of executer institutions causes and makes the system more complex. The aim of this study is to evaluate the Turkish incentive system as a fiscal policy tool in general and to provide solution suggestions for the current problems in the system. In the study, main concept of incentive policies, government supported investment incentives, export incentives and incentives for SMEs applied in Turkey, has been discussed. Keywords: Investment, Export, SME, Fiscal Policy, Incentive Policies, Turkish Incentive System.