Effects of tax deductions: An empirical examination of the effectof special consumption tax deductions on tax revenues in Turkey

The main purpose of reducing Special Consumption Taxes is to revitalize the sector and many sub-sectors affected by the sector by increasing the total demand level for the products subject to discount, and thus to accelerate economic growth while increasing tax revenues. It can be said that the discounts will increase investments in the sectors subject to tax reductions and, accordingly, reduce unemployment. For this purpose, in some periods in Turkey, regulations have been made to reduce indirect taxes such as VAT and SCT. While analyzing the impact of tax reductions, especially special consumption tax reductions, on total special consumption tax revenues and total budget revenues, GDP per capita, SCT reductions that may have a positive or negative impact on this process. Other variables such as SCT revenues, Budget Revenues, the share of SCT revenues subject to reduction in total SCT revenues and exchange rate changes were taken into account. In the effort to obtain sufficient revenue for public financing needs in optimal taxation, it is important to create a tax system that will minimize the efficiency costs of the tax as well as equitably distribute the tax burden. In the optimal taxation theory, the answers to the questions of whether the tax should be collected on consumption or income and what the most accurate rate should be can give different results in each country. For example, in our country, special consumption tax is not collected on all goods. The choice here, in terms of optimal taxation, is for the government to provide a fixed amount of revenue through a limited set of tax instruments that can be administered cost-free. In this respect, it will be important to determine what the most appropriate rate of tax reductions on some commodity groups that are subject to special consumption tax should be in order to achieve what is expected with the reduction in terms of optimal tax theory, or to tax the most appropriate commodity groups in terms of taxation of consumption, or to tax some commodities at a lower rate in order to achieve the target. The purpose of this study; While trying to analyze the effect of tax reductions on tax revenues, the aim is to examine the financial impact of the reductions in SCT, especially on motor vehicles, through the threshold model.