THE IMPACT OF REGIONAL TAX INCENTIVES ON HOUSEHOLD INCOMES IN TÜRKİYE

Abstract

This study analyzes the effects of regional tax incentives on household incomes in Türkiye by using difference-in-differences regression methodology. In Türkiye, a comprehensive regional tax incentive law was introduced in 2009 and it was reorganized in 2012. This new tax incentive law includes additional incentives for investments to be made in the Southeastern Anatolia region. This paper analyzes the effects of these tax incentives on household incomes mainly in the Southeastern Anatolia region of Türkiye. The households of the Southeastern Anatolia region were considered as the treatment group, whereas the households of the neighboring regions were considered as the control group. We estimated household incomes in the regions using the Income and Living Conditions Surveys conducted by Turkstat from 2006 to 2018. In conclusion, it is estimated that incomes of households especially living in Southeastern Anatolia region have increased significantly higher than the household incomes of neighboring regions after 2012. When the analysis is repeated for households whose main income source is entrepreneurial incomes there is no significant effect of the tax incentives on entrepreneurial incomes.

Keywords

• household income
• tax incentives
• region

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