Buoyancy effect of taxes on regional basis in Turkey

Taxes are the most important source of income that states benefit from both to finance public expenditures and to fulfill their economic and social duties. Adjustments in tax policies can be made to achieve non-financial purposes as well as increase tax revenues. The effect of discretionary arrangements made in tax legislation on tax revenue is measured with the concept of tax buoyancy. The tax buoyancy effect is obtained by adding the automatic changes in tax revenues to the changes in tax revenues resulting from discretionary measures taken by the government. In this context, the buoyancy effect has been estimated by considering Income Tax, Corporate Tax, Value Added Tax, Special Consumption Tax, direct taxes, indirect taxes, and total tax revenues in Turkey for the period 2004-2019. In this study, which aims to measure the effect of discretionary arrangements made in terms of each tax type to the relevant tax revenue, six incentive zones, which were constituted considering the Decision on State Aids in Investments numbered 2012/3305 in Turkey, were taken into account. The overall result obtained from the analyzes made for the period of 2004-2019 in Turkey is that the effect of discretionary regulations on the relevant tax revenue is weak. When the buoyancy coefficients are examined on a tax basis, it has been observed to be below 1 for all taxes. This result reveals that the efficiency of the Turkish Tax System is not at the desired level and the effect of the implemented fiscal policies is insufficient. Keywords: Tax buoyancy effect, incentive zone, panel data analysis, Turkey.