Taxation and company attitudes: Turkish automobile market

Company attitudes in the context of industrial economics are identified as behavioural rules that are followed to select the variables in their control zone to raise their market shares and profitability to gain competitive advantage against their potential rivals. In this context, company attitudes are affected from the market structure and the taxation policy of the governments. The effects of taxes on company attitudes vary from the market structure, the elasticity of supply and demand to the type and the size of tax being applied. Taxes that are defined as the irrevocable monetary or similar economic values taken from economical foundations relying on its sovereignty power to implement government?s or other authorized public institutions? fiscal and extra-fiscal functions can be classified as direct and indirect taxes. Under certain conditions the incidence of indirect taxes by companies possible and the amount and the direction of this incidence depends on the elasticity of demand and supply. On the other hand, since some direct taxes are taken from companies? profits, their (tax) incidence is technically impossible. Thus, the expected effects of existing tax policy change due to the elasticity of supply and demand, market structure and tax types. In the Turkish automobile market, it?s needed to examine the effects of taxes on market attitudes, since indirect taxes account for approximately the half of the sales price and the conditions of competition change in accordance with the demand elasticity. It?s seemed that the automobile market in Turkey has an oligopolistic structure. While more than half of the production is being exported, approximately the same rate of goods are being imported. The automobile market that has a demand elasticity is seemed to produce at low capacity in some parts of the supply process. The firms in the market compete by using non-price variables due to the high taxes and elastic demand. In this extent, the effects of taxes on company attitudes can be listed as developing new products and models, improving service and after sales service, the increase in the market access of the foreign companies after Customs Union, and the strategies that are determined by the local firms for making new investments to increase their competition opportunities. Consequently, the taxes applied to automobiles bring in tax burdens approximately as twice as the average tax in the European Union, and this leads to a restriction over the company attitudes. However, it may be risky to reduce the taxes in terms of expanding the deficits in the budget and payments balance. Furthermore, it?s likely not to reflect tax discount, practiced by overlooking the elasticity of supply and demand, to the prices. As a matter of fact, in the past similar firm attitudes were appeared in tax reduction applied to other products. Hence, the high taxes in the automobile market will continue to be exposed to criticism as a current issue. Key Words 1. Automobile market 2. Company attitudes 3. Taxation 4. Price elasticity 5. External economies