Socio-economic analysis of tax expenditures in Turkey and comparison with selected OECD countries

In the literature, tax expenditures are often compared with public expenditures. Surrey, who has made important studies on this subject, has opinions that tax expenditures should be preferred if tax expenditures are more efficient than public expenditures. It is possible to state that the effect of tax expenditures on the public budget is no different from public expenditures. Therefore, ineffective exceptions, exemptions, discounts, tax deferrals, cancellations, accelerated depreciation, tax credits, reduced tax rates, tax holidays, deductions and refunds, reconciliation, reduction in penalties, etc. The fact that the implementations remain in force or the frequent use of tax amnesties may cause the use of public resources in inefficient areas. It is important to take objective decisions when making choices about the use of resources by the private sector through tax expenditures or their utilization by the public sector through public expenditures. In this context, it is essential that the tax expenditure practices allegedly created for economic and social reasons do not turn into those that mainly serve political purposes within the scope of rent-seeking and vote maximization activities. On the other hand, contrary to Surrey's view, it does not seem possible to completely abandon public expenditures because there are pure public goods and some impure public goods need to be delivered to wider masses. Today, tax expenditures reports are published in thirty-three out of thirtyeight OECD countries. When the European Union (EU) and G20 countries are taken into account, the number of countries that publish tax expenditures reports is increasing. On the other hand, the reporting period, the nature of the published reports, whether the data are comparable, the methodology is not disclosed, etc. There are some negative aspects. In addition, one of the most important problems in the analysis of tax expenditures is not making benefit calculations, but only including costs for the public budget. Eleven OECD countries were selected based on certain criteria in order not to broaden the scope of the research and not to harm the integrity of the subject. In this study, it can be considered as a good practice feature in reporting tax expenditures; Countries that are similar or different from each other in terms of geographical, economic or political structure have been determined, together with the specification of the methodology used, periodic publication, tight association of reports with the budget process, distinction between developed and developing countries. In this context, tax expenditure data of the United States (USA), Canada, Germany, France, Italy, Hungary, Latvia, Denmark, Sweden, Norway and Australia are included. Compared to selected OECD countries, the share of total tax expenditures in GDP is not considered high in Turkey. For example, while the said rate was 4.14% in Turkey in 2019, 5.24% in Sweden, 6.97% in the USA, 7.07% in Norway, 7.65% in Latvia, and Australia. 8 and estimated at 16% in Canada. On the other hand, tax expenditures are calculated as 4.12% in France, 3.41% in Italy, 2.26% in Denmark, 2.14% in Hungary and 1.69% in Germany. Another striking factor in the research is that while the share of total tax expenditures in GDP was 1.08% in 2006, it increased to 1.46% in 2009 and increased to 1.46% in 2014 in the context of the expansionary fiscal policy, which can be claimed to be implemented to overcome the Global Financial Crisis. After calculating at the rate of 1.16% in , it reached 3.39% in 2015, the year in which the general elections were held in Turkey. In addition, developments concerning the political agenda, national security and economy between 2015-2019 increased the government's orientation to tax expenditures. In this context, the share of total tax expenditures in GDP increased to 4.14% in 2019. It is estimated at 3.87% in 2021. However, since the tax expenditure estimates include a certain delay period, the tax expenditure amounts applied especially due to the Coronavirus Disease (Covid-19) Pandemic could not be included in the study. This situation can be shown among the limitations of the research. On the other hand, tax expenditures in tax expenditure reports published without legal obligation in Turkey; tax base is estimated according to functional and sectoral calculation methods. In addition, while calculating the financial impact of tax expenditures, the income forgone method is used in Turkey as well as in selected OECD countries. However, in the reports published in Turkey, the methodology for calculating tax expenditures is not shared. This study will focus on the socio-economic effects of tax expenditures. In addition, it will be tried to find an answer to the question of which areas could be more useful if the income that was given up due to the mentioned tax expenditures was evaluated. In this context, a list of tax expenditures that can be published every year and in a relatively summary form in Annex-1 and a tax expenditures report proposal that can be published in a two-to-three-year period in Annex-2 are presented. Keywords: Tax Expenditures, Tax Incentives, Tax Advantage, Tax Exemption, Tax Exclusion, Tax Relief.