Is There A Long-Run Relationship Between Taxation And Growth: The Case Of Turkey (original) (raw)
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A PRELIMINARY ANALYSIS ON THE LONG-RUN RELATIONSHIP BETWEEN TAXATION AND GROWTH IN TURKEY
2008
Although higher taxation may lead to a fall in growth rates through distortion of decisions to invest and save, certain tax policies of the government may also enhance economic growth when government investments aiming at improving the infrastructure induces private investment. This study aims to explore the effects of taxation on growth in Turkey during the period of 1975-2004, by the use of time series analysis. In addition to total taxation, direct and indirect taxes are considered separately (income tax, goods and services tax and foreign trade tax). Engle-Granger two-step cointegration results show that as total taxation/GDP ratio and trade taxation/GDP ratio increase, growth rate decreases. There is no evidence of a long run relationship between goods and services tax/GDP ratio and growth. As for the nondistortionary income taxation, the relationship is in the reverse direction: as growth rate increases, income tax/GDP ratio increases.
The Relationship Between Tax Revenue And Economic Growth In Turkey: The Period Of 1975-2011
In the study, the relationship between tax revenues and economic growth for the Turkish economy has been examined in the period of 1975-2011. Johansen Juselious cointegration test and Granger causality test have been used in order to find long term and short term relationship, respectively. Impulse-response function and variance decomposition analysis have been applied via VAR model. The findings have shown that there is interaction between tax revenue types and the economic growth in the long term and is not such an interaction in the short term. The effect of the shock given to indirect tax revenue to economic growth rate has decline; the response of growth rate to shock given to direct tax revenue has been tendency to rise up towards the end of the period. In the variance decomposition method; direct tax revenue is more effective than indirect one. But, the growth rate that is expressed by GDP (gross domestic product) or other factors affecting growth rather than tax revenue has been appeared affected itself
İstanbul iktisat dergisi, 2021
The tax revenues, which constitute the most important income item of the state, provide the necessary financing for sustainable economic growth in evolved countries, development efforts in developing economies, and form the basis of social welfare. Therefore, the relationship between economic growth and tax revenues is significant and numerous empirical studies have been carried out on this subject. However, there is no study testing the hidden cointegration. This paper aims to test the presence of hidden cointegration between economic growth and tax revenues and intends to develop further typologies. To test the relationship, data on the ratio of annual tax revenues/ GDP between 1985-2018 in Turkey was used, and Hidden Cointegration Approach developed by Granger and Yoon (2002) and crouching error correction model were applied. The analysis results demonstrated that the tax revenues decreased across variables and that there was a cointegration relationship in periods when the GDP increased. This manuscript is a contribution to the literature since a different technique was performed to examine the relationship between growth and tax revenues, and the results obtained will be crucial for decision-makers.
Tax Revenue and Main Macroeconomic Indicators in Turkey
Abstract This study is about the behavior of main macroeconomic indiactors and their interaction with tax revenue with annual data over 1980-2013 in Turkey. The main purpose is to study the causality between tax revenue and a broad list of indicators over the stated period. First we present descriptive statistics and then test for the stationarity of the variables after which we test for the existence and direction of Granger causality between pairs of indicators proven to be stationary. In the last part of the study we search for the permanent long-run relationship via the existense of cointegration among variables after which we establish the error correction mechanism. We have intentionally selected the time span since Turkey has experienced several shocks before being addressed in the list of G-20 and a typical emerging market economy. Besides. the socalled great recession is included in the period and is still prevailing with perplexing attitutes of managing the crisis. Our results document that there is unidirectional causality from total tax revenue to foreign direct investment and external debt stock. In addition we report a cointegrating relation among tax revenue, GDP and external debt stock. Keywords: Tax Revenue, Macroeconomic Indicators, Stationarity, ADF, Granger Causality, Cointegration, Error Correction
The relationship between tax burden and economic growth: Turkey case
Pressacademia, 2020
Purpose-In the theoretical framework, the relationship between tax revenues and economic growth, which is the multiplier mechanism, shows that an increase in tax revenues has a negative impact on economic growth. In this study, the relationship between tax burden and economic growth is examined by VAR analysis and Granger causality test. Methodology-In this study, VAR analysis and Granger Causality test analysis methods are used. In the study, the analysis is done for Turkey. Annual data are used in the study. The analysis covers the years from 1970 to 2018. In the study, firstly VAR analysis is done and then Granger Causality test is performed. Findings-The findings obtained in the analysis are as follows. In the VAR analysis the tax burden has a negative effect on the 3rd period growth. As a result of the Granger Causality test, it is concluded that tax burden and economic growth are mutual causes of each other. Conclusion-According to the results obtained, the tax burden affects economic growth negatively. Accordingly, increasing tax rates will not have positive feedback in terms of economic growth, and vice versa, its will have negative effects on economic growth. It would be more positive result, if policy makers reduce their tax rates in practice rather than increasing.
The Impact of Tax Revenue on Economic Growth in Turkey from 2010 to 2020
Araz waleed Hussein , 2022
This study aimed to examine and analyze the impact of tax revenue on economic growth and the relationship between tax revenue and economic growth in Turkey for the period 2010 to 2020. This study purposed that tax revenue has a positive impact on economic growth and has a long-run relationship between variables. According to the ARDL model, results are significant at 5% that accept the null hypothesis and reject the alternative hypothesis which means tax revenue has a positive impact on economic growth. The tax revenue and economic growth have a long-run relationship by the bound test for the study period from 2010 to 2020 in Turkey's economy.
FINANCIAL DEVELOPMENT AND TAX REVENUES IN TURKEY: A NON-LINEAR COINTEGRATION ANALYSIS
In this study, we investigated the interaction between tax revenue and major indicators of financial development including banking sector development and stock market development in Turkey using monthly data during the period January 2006 – January 2016 by employing the asymmetric ARDL cointegration method by Shin, Yu and Greenwood-Nimmo (2014). Our findings suggested that development levels of both stock market and banking sector affected total tax revenues positively when nonlinearities were considered. However, we found that there was no relationship between financial development indicators and tax revenue when nonlinearities were ignored. So, our findings demonstrated that the appropriate modelling method considering the characteristics of the dataset is important to get the right results.
The Impact of Direct and Indirect Taxes on the Growth of the Turkish Economy
Public Sector Economics
Governments are able to implement monetary and fiscal policies to achieve economic objectives, such as increasing production, ensuring price stability, improving the balance of payments, and achieving full employment. While central banks carry out monetary policies, governments, in contrast, develop fiscal policies. Fiscal policy instruments can include public expenditures, taxes, and borrowing. In countries that have low savings levels, individuals participate in public expenditures by spending a large part of their income. Therefore, taxes are effectively used as a major policy instrument. The impact of both direct and indirect taxes on economic growth in Turkey has been analyzed by employing the autoregressive distributed lag (ARDL) approach. Test results suggest a positive and significant impact of indirect taxes on economic growth as well as a negative and significant impact of direct taxes.
The Role of Taxes as an Automatic Stabilizer: Evidence from Turkey
Economic Analysis and Policy, 2013
The purpose of this study was to empirically investigate the interactions between various taxes and GDP, and to detect whether taxes function as an automatic stabilizer in Turkey. Firstly, when using a time series unit-root test as proposed by Dickey-Fuller (1979), econometric findings revealed that taxes and level of GDP are not static. Secondly, upon employing cointegration designed by Johansen (1988), it was found that GDP and taxes are cointegrated. Thirdly, the Granger (1969) causality test showed that a uni-directional causality exists among taxes, and the causal relationship is between GDP to SCT, and from VAT and CIT to GDP. On the other hand, there was a bi-directional causality between GDP and PIT. Empirical findings showed that personal income tax is the most effective tax in stabilizing business cycle fluctuations. Corporate income tax is also important.
Impact of Taxation on Economic Growth in an Emerging Country
International Journal of Business and Economics Research, 2020
Tax revenue and economic growth in Jordan have been undertaking an upward growth path in absolute terms. A number of studies indicated mixed results for the effect of taxes on economic growth. Numerous of these studies found a negative relationship, others found that taxes affect economic growth positively. So this paper trying to investigate the short and long run effects of taxation on economic growth in an emerging country, Jordan. Annual data for the time period 1980-2018 used to develop an Auto-Regressive Distribution Lag (ARDL) approach. Results of the bounds test specify that the variables of economic growth, taxes, capital and trade are cointegrated. The empirical results of the estimated model confirm that there is a negative short and long run relationship between taxes and economic growth in Jordan. Also results of the cointegration estimation indicate that the short run deviations from long run equilibrium is adjusted by 60% towards long run equilibrium each year. Thus the paper proposes that fiscal policy is essential to promote sustainable economic growth. Therefore policy makers of the fiscal policy should take in account a tax rates that are appropriate to make enough revenues needed to finance government utility expenses that promote economic growth.