The role of tax incentives for the elimination of regional development disparities in Turkey

Economic, social, cultural and infrastructural development levels may differ between regions in countries. These differences are more clear in developing countries than in developed countries. The main reason why the development gap between regions has come to the forefront in recent years is that the cities within the same region can be seen even in different neighborhoods and districts of the same city. The start of the industrial revolution in Europe, in place of the First World War and then the development gap between regions in our country after the establishment of the Republic of Turkey, has been seen clearly. In order to eliminate these differences which are a big problem for our country, especially after 1960s, State Planning Organization (DPT) carried out important works. Five-year Development Plans (BYKP) formed the basis of these socio-economic studies to date. Within the scope of these development plans, many regional projects (DAP, GAP, DOKAP, KÖY…) have been realized. The Law on the Implementation of the Development Plan No. 933 issued in 1967 with the commencement of the Five-Year Development Plans starting from 1963 started to be implemented in 2009 despite the foundations of the regional incentive system. With this system, provinces are divided into 4 groups by taking into account the socio-economic development levels of 2 regions of the Classification of Statistical Region Units (İBBS). Due to the decrease in the effectiveness of this system and the differences in the regional development, significant changes were made in our country's tax incentives for regional development in 2012 and the incentive system was renewed with the Decision on State Aids in Investments published in the Official Gazette. In this way, the authority of the state in investments has been increased in order to reduce the development differences. Provinces are divided into 6 regions with regional incentive practices with this latest law. Tax incentives were offered to these regions determined according to socio-economic development levels. The drastic changes in tax incentives and domestic and foreign investment amounts through tax Investment Incentive Certificates (YTB) also had an impact on the number of employment. However, these studies carried out in order to stimulate economic activity in regions with high development differences, regional development policies and especially tax incentive implementations could not create the desired level of impact in the regions. In order to implement effective fiscal policies to eliminate regional development disparities, it is necessary to develop well-functioning regional policies in addition to state support. Keywords: Regional Development, Incentives, Tax Incentives, Regional Development Difference