THE EFFECT OF TAXES ON INCOME DISTRIBUTION: AN ANALYSIS FOR TURKEY AND OTHER SELECTED OECD COUNTRIES

Abstract

Equal distribution of income is important for social peace and economic stabilization. However, income is not distributed equally in any country and the governments try to provide the fairest distribution of income by intervening with various instruments. As an economic instrument, taxation is one of the most direct way to keep inequality in check and reduce poverty in the short term. This study aims to investigate the effect of taxes on income distribution. In this context, to what extent the change in the share of total tax revenues in the Gross Domestic Product affects the gini coefficient in Turkey and other selected OECD Countries between 2002 and 2019 is analyzed by using Panel ARDL (Auto Regressive Distributed Lag) model. As a result of the analysis, it is concluded that an increase in the share of tax revenues in GDP decreases the Gini index by 0.17.

Keywords

• Tax Income
• Income Distribution
• Gini Index

References

1. Akdogan, A. (2011). Kamu maliyesi. Ankara, Turkiye: Gazi Kitabevi.
2. Aktan, C. C. & Vural, I. Y. (2002). Makro ekonomik politikalar, gelir dagilimi ve yoksulluk. C. C. Aktan (Eds.), Yoksullukla mücadele stratejileri (pp. 1-31). Ankara, Turkiye: Hak- İs Konfederasyonu Yayinlari. Altay, A. (2015). Kamu maliyesi. Ankara, Turkiye: Seckin Yayincilik.
3. Balseven, H. & Tugcu, C. T. (2017). Analyzing the effects of fiscal policy on income distribution: A comparison between developed and developing countries. International Journal of Economics and Financial Issues, 7(2), 377-383.
4. Bargain, O. (2009). The distributional effects of tax-benefit policies under new labour: A shapley decomposition. IZA Discussion Paper No. 4296, Retrieved from SSRN: https://ssrn.com/abstract=1434630
5. Bourguignon, F. (2018). Spreading the wealth. Finance and Development, (55), 22-24.
6. Caliskan, S. (2010). Turkiye’de gelir esitsizligi ve yoksulluk. Sosyal Siyaset Konferansları, (59), 89-132. Cevik, S. & Correa Caro, C. (2015). Growing (Un)equal: Fiscal policy and income inequality in China and BRIC+. IMF Working Paper WP/15/68, Retrieved from https://www.imf.org/en/Publications/WP/Issues/2016/12/31 /Growing-Un-equal-Fiscal-Policy-and-Income-Inequality-in-China-and-BRIC-42806
7. Choi, I, (2001). Unit root tests for panel data, Journal of International Money and Finance, 20, 249–272.
8. Demirgil, B. (2018). Vergilerin gelir dagilimi uzerindeki etkisi: Ampirik bir calisma. Cumhuriyet Universitesi Iktisadi ve Idari Bilimler Dergisi, 19(2), 118-131. Duncan, D. & Peter, K. S. (2012). Unequal inequalities: Do progressive taxes reduce income inequality? IZA Discussion Paper No. 6910, Retrieved from http://repec.iza.org/dp6910.pdf

9. Eser, L. Y. & Genc, M. C. (2020). Gelir ve servet uzerinden alınan vergilerin gelir dagilimi uzerindeki etkisi: OECD ulkeleri ornegi. Maliye Dergisi, (178), 224-239.
10. Fuest, C., Niehues, J. & Peichl, A. (2009). The redistributive effects of tax benefit systems in the enlarged EU. IZA Discussion Paper No. 4520, Retrieved from https://www.iza.org/publications/dp/4520/the-redistributive-effects-of-tax-benefit-systems-in-the-enlarged-eu
11. Im, K., S., Pesaran, M., H., & Shin, Y (2003). Testing for unit roots in heterogeneous panels, Journal of Econometrics, 115 (1), 53-74.
12. Kanca, O. C & Bayrak, M. (2019). Vergilerin gelir dagilimi uzerindeki belirleyiciligi: Panel veri analizi. Ataturk Universitesi Sosyal Bilimler Enstitusu Dergisi, 23(4), 1495-1514.
13. Kilinc, Savrul B. & Taskin, A. (2020). Dolayli ve dolaysiz vergilerin Turkiye’deki gelir dagilimi uzerine etkileri. Eurasian Academy of Sciences Social Sciences Journal, (29), 1-19.
14. Kirmanoglu, H. (2013). Kamu ekonomisi analizi. Istanbul, Turkiye: Beta Yayincilik.
15. Levin A, Lin, CF., & Chu, CS., J. (2002). Unit root tests in panel data: asymptotic and finite-sample properties, Journal of Econometrics,108(1), 1–24.
16. Maddala, G.S. and Wu, S.(1999). A comparative study of unit root tests with panel data and a new simple test, Oxford Bulletin of Economics and Statistics, 61, 631-652.
17. Martínez-Vazquez, J., Vulovic, V. & Moreno Dodson, B. (2012). The impact of tax and expenditure policies on income disttribution: Evidence from a large panel of countries. Hacienda Pública Española/ Review of Public Economics, (200), 95-130.
18. Oboh, T. & Eromonsele, P. E. (2018). Taxation and income inequality in Nigeria, NG- Journal of Social Development, 7(1), 63-72. doi: 10.12816/0046771
19. OECD. (2012). Revenue statistics 2012. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-2012_rev_stats-2012-en-fr
20. OECD. (2013). Revenue statistics 2013. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-2013_rev_stats-2013-en-fr
21. OECD. (2014). Revenue statistics 2014. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-2014_rev_stats-2014-en-fr
22. OECD. (2015). Revenue statistics 2015. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-2015_rev_stats-2015-en-fr
23. OECD. (2016). Revenue statistics 2016. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-2016_rev_stats-2016-en-fr
24. OECD. (2017). Revenue statistics 2017. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-1965-2016_9789264283183-en
25. OECD. (2018). Revenue statistics 2018. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-2018_rev_stats-2018-en
26. OECD. (2019). Revenue statistics 2019. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-2019_0bbc27da-en
27. OECD. (2020a). Income inequality. https://data.oecd.org/inequality/income-inequality.htm OECD. (2020b). Revenue statistics 2020. Retrieved from https://www.oecd-ilibrary.org/taxation/revenue-statistics-2012_rev_stats-2012-en-fr
28. Pesaran, H. and Shin, Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis. Econometrics and economic theory in the 20th century. The Ragnar Frisch Centennial Symposium. Ch. 11. Cambridge, UK: Cambridge University Press.
29. Pesaran, H., Shin, Y., & Smith, R., P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association 94 (446), 621-634.
30. Prasad, N. (2008). Policies for redistribution: The use of taxes and social transfers. International Institute for Labour Studies, Discussion Paper. DP/194, Retrieved from https://www.researchgate.net/publication /228129635_Policies_for_Redistribution_The_Use_of_Taxes_and_Social_Transfers
31. Sameti, M. and Rafie, L. (2010). Interaction of income distribution, taxes and economic growth (The case of Iran and some selected East Asian countries). Iranian Economic Review, (14), 67-81.
32. Sener, O. (2014). Kamu ekonomisi. Istanbul, Turkiye: Beta Yayincilik.
33. The World Bank. (2020). Gini index (World Bank estimate). Retrieved from https://datacatalog.worldbank.org/search?query=%20gini-index-world-bank-estimate-1
34. Turk, I. (2005). Maliye politikası. Ankara, Turkiye: Turhan Kitabevi.
35. Turkish Statistical Institute. (2020). Gelir ve yasam kosullari arastirmasi, 2019. Retrieved from https://data.tuik.gov.tr/Bulten/Index?p=Gelir-ve-Yasam-Kosullari-Arastirmasi-2019-33820#
36. Republic of Turkey Ministry of Treasury and Finance. (2020). Butce buyuklukleri ve butce gerceklesmeleri. Retrieved from https://www.hmb.gov.tr/bumko-butce-buyuklukleri-ve-butce-gerceklesmeleri
37. Yuce, M. (2002). Turkiye’de gelir dagilimi bozuklugunun izlenen kamu gelir ve harcama politikaları ile baglantisi. Bilig, (23), 1-38.