Empowering Equity: The Impact of Tax Policies on Inclusive Growth in Turkey

Abstract

This study uses the ARDL model to analyze whether the general tax structure affects inclusive growth in Turkey by investigating the 2006:1–2021:4 periods offering growth-friendly and inclusive tax policy reform proposals for Turkey. The Turkish economy is a notably fragile economy that is significantly affected by global shocks. Especially in recent years, the Turkish Lira has experienced a period of stable depreciation against other currencies, adversely affecting macroeconomic indicators such as inflation and economic confidence. Tax revenues are a basic building block in financing public expenditures. Turkey receives significantly lower tax revenues than most OECD countries; its tax structure is mainly based on consumption taxes and personal income tax and corporate tax are largely inadequate. Although this situation increases Turkey’s economic growth, it also greatly deteriorates inequality in income distribution. The results of this study suggest that, in Turkey, property tax is more effective in promoting inclusive growth. However, Turkey’s tax system is insufficient in terms of access to opportunities to allow Turkish society to benefit from economic growth. To foster inclusive growth in Turkey, it is strongly recommended that a thorough redesign of the tax structure be undertaken, aimed at ensuring equitable opportunities for the entire society.

Keywords

• Tax Policy
• Taxation
• Progressivity
• Inclusive Growth
• Turkey

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