Search of optimal taxation in Turkey: A model and application

Since taxes are the basic building blocks of public finance, designing an ideal tax system is a priority target among sustainable public finance principles. An ideal tax system is one that balances the various desirable attributes of taxation. Taxes according to these qualifications; It should provide the required income, be implemented in a way that minimizes market deviations and should not cause excessive costs on the taxpayer and tax administrations. One of the approaches to analyze at least some of these and similar qualities is a field of research called optimal taxation. Optimal taxation is a normative approach based on the standard tools of welfare economics that develops policies on how to allocate resources most effectively and ensure fair income distribution. In the optimal tax theory, while maintaining the balance between efficiency and fairness, different formulas are focused on for optimal tax rates in order to obtain sufficient tax revenue to meet the public financing need. Because the main factor in determining the optimal tax rates for sustainable development goals in economies is the optimally determined taxes. In this context, optimal tax and tax rates are an important leverage to ensure the sustainable development and welfare of the society. In line with this information, in this study, it is aimed to analyze the relationship between tax rate and tax income and to draw the real Laffer curves of Turkey by considering the optimality problem of fiscal policies in the Turkish tax system for the period of 1980-2019, from the perspective of the Laffer curve. In this direction, macroeconomic variables such as tax rates, tax revenues, crisis periods, unemployment rates, real wages were used.Existing variables were included in the analysis with the help of the econometric package program. Within the scope of time series, the effect of tax rate on tax revenues was investigated using Johansen and ARDL cointegration approaches. According to the findings obtained from the analyzes, the total and indirect tax rates in Turkey are on the right of the Laffer curve, in other words, the Laffer curve exceeds the peak; it has been determined that the direct tax rates are on the left of the Laffer curve and are below the optimal tax rates.