Personal Income Tax Elasticity in Turkey: 1975-2005
AbstractThe estimation of tax elasticity; the response of tax revenues to changes in income, is important for at least three reasons: i) formulating government budgets and monitoring tax collections (Sen, 2002), ii) the specification of tax functions, iii) the automatic stabilizing properties of the tax system and the public sector deficit (Hutton, Lambert; 1980, 1982). Among the various approaches to tax elasticity calculation in literature (Tanzi, 1969, 1976; Greytak and McHugh, 1978; Hutton and Lambert, 1980; Ehdaie, 1990), the most famous approach is Tanzi’s Method due to its simplicity and the consensus about its correctness of elasticity estimates. Johansen cointegration tests for the period 1975 - 2005 show that personal income tax elasticity in Turkey is around 0.95, indicating almost unit elasticity. Increasing income can be considered as insurance to maintain an equivalent increase in tax revenue; however it doesn’t seem to be the way to obtain higher tax revenues.
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Bibliographic InfoPaper provided by Dokuz Eylül University, Faculty of Business, Department of Economics in its series Discussion Paper Series with number 06/01.
Length: 12 pages
Date of creation: 11 Jul 2006
Date of revision: 11 Jul 2006
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Web page: http://www.deu.edu.tr/DEUWeb/Icerik/Icerik.php?KOD=442
More information through EDIRC
Personal income tax; tax elasticity; Tanzi method;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-21 (All new papers)
- NEP-MAC-2006-07-21 (Macroeconomics)
- NEP-PBE-2006-07-21 (Public Economics)
- NEP-PUB-2006-07-21 (Public Finance)
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