Reflection of paternalistic state understanding on tax policy: Evaluation of sin taxes financially and socially

In this study, the conceptual framework, causes, scope, application methods of sin taxes, which are integrated with the understanding of paternalism, the views of those who support and do not support mentioned taxes, and the financial and social effects of these taxes are examined in terms of countries. In present study, the answer to the question of whether the financial aspect of sin taxes or the socialaspect is dominant has been tried to be revealed by making a literature review. For this purpose, excise duty, value added tax and alcohol, cigarette and obesity taxes covered by these taxes were analyzed based on the USA, Turkey and European Union member Germany, Belgium, France, Netherlands, Italy Luxembourg countries. While financial assessment was made with tax revenue data, social evaluation was made with alcohol and cigarette consumption and obesity rate data. The study covers the income data of special consumption and value added taxes based on the years 1985-2020, and additionally the consumption levels in the same years. Sin taxes have found an application area by emphasizing the social purpose together with the understanding of paternalism, which expresses the individual and social intervention of the state by considering the welfare of its citizens. However, the high tax revenues provided by the easy collection of sin taxes through financial anesthesia have overshadowed the social function. These taxes, which aim to reduce consumption and prevent external losses, did not significantly affect consumption due to the low price elasticity of demand and caused the social purpose to fail. In addition, the regressive tax structure affecting the relatively low-income segment and the existence of the informal economy causing tax injustice are another disadvantage of these taxes. Despite all the advantages and disadvantages of these taxes, the priority given by the countries according to the level of development varies. While developed countries such as the USA, Germany, Belgium, France, Netherlands, Italy and Luxembourg prioritized the social purpose with their tax structure dominated by direct taxes, developing countries such as Turkey prioritized the fiscal purpose with a tax structure dominated by indirect taxes.In order to these taxes to truly serve a social purpose, they must significantly reduce consumption and, accordingly, reduce the external damage caused by consumption.