The effect of taxes on income distribution: Panel data analysis for OECD countries (2000-2014)

This study, titled "The Effect of Taxes on Income Distribution: Panel Data Analysis for OECD Countries (2000-2014)", aimed to determine whether the taxes in OECD countries have a positive or negative effect on the income distribution. Taxes constitute one of the important income sources of the states for the financing of public expenditures. In this study, following the general definitions of the tax; the taxes on income, wealth and expenditures are explored. The effects of these tax types on income distribution are examined. A general analysis is made regarding the tax systems and income inequality of OECD countries. Then, the concept of income distribution is explained and the Lorenz Curve, the Gini Coefficient, the Percentage Shares Analysis and the Dalton Atkinson inequality criteria are investigated. The alleviation of inequality of income distribution is one of the primary objectives of the world countries. The tax policies of the countries have an effect on the alleviation of income inequality. In the last part of the study, the effect of taxes on income, wealth and expenditures on income distribution is analyzed by panel data analysis for OECD countries. In this study, the period of 2000-2014, where data of all variables are available for 36 OECD member countries, is investigated. According to the findings, the conclusion can be drawn from this study is that there is a significant negative relationship between the taxes on income and wealth and the Gini Coefficient. In other words, it can be concluded that an increase in the share of taxes both on income and wealth in GDP leads to a decrease in the income distribution inequality for the examined period. Nevertheless, there is a significant positive relationship between the taxes on expenditures and the Gini Coefficient. In that regard, it can be said that an increase in the share of taxes on expenditures in GDP leads to an increase in the income distribution inequality. Keywords: Tax Revenue, Income Distribution, OECD Countries, Gini Coefficient