Tax burden: Effects on economic growth and the case of Turkey

The concept of tax burden is used in different meanings in the public finance literature. In this study, the concept of tax burden means the total tax burden. Tax burden refers to the ratio of public revenues to gross domestic product. The tax burden is calculated in two ways. According to the first of the calculation forms, only tax revenues are taken into consideration and in the other calculation tax revenues as well as parafiscal incomes are taken into consideration. Purpose of the study is the effect of the tax burden on economic growth which is an economic factor. The economic size of the state and the influence of taxes, which is the factor that determines the proportion of this size, has always been a matter of debate.Especially, It has been discussed for a long time that, the low ratio of taxation promotes high economic growth.I n this study the relation between tax burden and GDP was investigated for the period 1975-2016 and co-integration analysis with Pesaran bounds testing (2001) is applied to estimate long term effect of tax burden on GDP. And then to the existence of long and short run relationships between GDP and tax burden, auto-regressive distributed lag (ARDL) bounds approach was employed. Results suggest that the existence of co-integration relationship between GDP and tax burden and the short and long run results indicate that tax burden is statistical significant and negatively affects economic growth.