The effect of unregistered employment on the income tax revenue in turkey

The concept of unregistered employment is a problem which occurs when the informations related to workers' employments are not given to the relevant public institutions and organizations or are given with some lack, and it is seen in all countries regardless of countries' levels of development. However, this problem has evolved into a constitutional problem in developing countries. Unregistered employment is a fact affecting the whole society ‒from the uninsured workers to their families‒ in financial, social and lots of other aspects negatively. Additionally, unreported employments cause a government to incur losses in insurance premium and tax revenue. Unregistered employment, which has a significant share in unregistered economy, is tried to be reduced with government policies by public administrations. Conducting the policies applied to encourage registry with determination and actively will reduce the unregistered employments. Decrease in unregistered employment will reduce the tax revenue loss of the government, increase the public expenditure, ensure the justice in taxation and also make positive contributions to the solutions of lots of social problems by preventing workers' losses of rights. In this study, the effect of unregistered employment on the income tax is analysed for 2006:M1-2017:M2 periods. During the study, the stability of series is analysed by means of ADF, PP and KPSS unit root tests. The causality relationship among series is studied by using Granger causality test and the cointegration relationship in the model is checked with Engle-Granger test. The analyses of long and short terms are carried out by using DOLS method and the long term coefficients are identified. KEY WORDS: Income Tax, Unregistered Economy, Unregistered Employment, Insurance Premium, Tax Revenue