Research Article
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Tax Capacity and Tax Effort in Turkiye and the European Union Countries: An Empirical Application

Year 2023, Volume: 30 Issue: 4, 817 - 840, 21.12.2023

Şeref Can Serin Murat Demir

https://doi.org/10.18657/yonveek.1274445

Abstract

An efficient tax system is pivotal for effectively implementing fiscal policy and fostering economic development. The extent to which a tax system realizes its full potential determines its efficacy. Nevertheless, existing literature highlights that various economic, social, demographic, and institutional factors can impose limitations on realizing potential tax capacity, thereby constraining the level of tax effort. In this context, this research’s principal objective is to assess tax efforts spanning 1995 to 2021 for 27 European Union member states, 3 European Economic Area nations, and Turkiye. Within this framework, our regression analysis attempts to unveil the influence of critical factors affecting taxable capacity, including sectors with inherent tax challenges, international trade dynamics, the scope of the shadow economy, and the level of financial development. The findings of our study shed light on several noteworthy trends. Northern European countries exhibit a notably higher level of tax effort than the remaining sample countries and Turkiye, which lags behind the sample’s average tax effort level. Furthermore, the study postulates that enhancing financial development and curbing the shadow economy can contribute to the expansion of fiscal space by bolstering tax capacity.
Key Words: Tax Capacity, Tax Effort, Tax Policy, Panel Data Analysis
JEL Classification: H20, E62, 023

Keywords

Tax Capacity Tax Effort Tax Policy Panel Data Analysis

References

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  • Atsan, E. (2017). The determinants of tax capacity and tax effort in Turkey for the period of 1984-2012. Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 10(4), 214-234. https://doi.org/10.25287/ohuiibf.339753
  • Aydin, M. and Bozatli, O. (2022). Do transport taxes reduce air pollution in the top 10 countries with the highest transport tax revenues? A country-specific panel data analysis. Environmental Science and Pollution Research, 29(36), 54181-54192. https://doi.org/10.1007/s11356-022-19651-8
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  • Bahl, R. W. (1971). A regression approach to tax effort and tax ratio analysis. IMF Staff Papers,18(3), 570-612. https://doi.org/10.2307/3866315
  • Baltagi, B. H., and Wu, P. X. (1999). Unequally spaced panel data regressıons wıth ar(1) dısturbances. Econometric Theory, 15(6), 814-823. https://doi.org/10.1017/s0266466699156020
  • Bird, R. M., Martinez-Vazquez, J., & Torgler, B. (2008). Tax effort in developing countries and high income countries: the impact of corruption, voice and accountability. Economic Analysis and Policy, 38(1), 55-71. https://doi.org/10.1016/S0313-5926(08)50006-3
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  • Chigome, J. and Robinson, Z. (2021). Determinants of tax capacity and tax effort ın Southern Afrıca: an empirical analysis. Applied Economics, 53(60), 6927-6943. https://doi.org/10.1080/00036846.2021.1954593
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  • Kızıltan, M. (2018). Analysis of local tax effort in Turkey with the new economic geography models approach (2007-2014) (Doctorate Thesis). Retrieved from: http://www.openaccess.hacettepe.edu.tr:8080/xmlui/handle/11655/5363?show=full
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Türkiye ve Avrupa Birliği Ülkelerinde Vergi Kapasitesi ve Vergi Gayreti: Ampirik Bir Uygulama

Year 2023, Volume: 30 Issue: 4, 817 - 840, 21.12.2023

Şeref Can Serin Murat Demir

https://doi.org/10.18657/yonveek.1274445

Abstract

Etkin bir vergi sisteminin özellikle maliye politikasının uygulanabilirliği ve ekonomik kalkınma süreci açısından önemli olduğu düşünülmektedir. En basit anlamıyla, bir vergi sisteminin etkinliği, potansiyelinin ne kadarının gerçekleştirildiğiyle ilgilidir. Bununla birlikte, literatürde ekonomik, sosyal, demografik ve kurumsal faktörlerin potansiyel vergi kapasitesinin gerçekleştirilmesinde bazı kısıtlamalar yaratabileceği ve vergi gayreti düzeyini sınırlayabileceği tartışılmaktadır. Dolayısıyla, bu çalışmanın birincil amacı, 27 Avrupa Birliği, 3 Avrupa Ekonomik Bölgesi üyesi ve Türkiye için 1995-2021 döneminde vergi çabası düzeyini belirlemeye çalışmaktır. Bu bağlamda gerçekleştirilen regresyon tahmini, vergilendirmenin zor olduğu sektörler, uluslararası ticaret, kayıt dışı ekonomi ve finansal gelişme gibi vergileme kapasitesinin temel belirleyicilerinin etkilerini ortaya koymaya çalışmaktadır. Ampirik bulgular vergi gayreti açısından Kuzey Avrupa ülkelerinin örneklemin geri kalanından daha iyi bir performans gösterdiği, Türkiye’nin ise örneklem ortalamasının altında olduğuna işaret etmektedir. Ayrıca finansal gelişmenin iyileştirilmesi ve kayıt dışı ekonomi ile mücadelenin vergi kapasitesini artırarak mali alan oluşumuna katkı sağlayabileceği savunulmaktadır.
Anahtar Kelimeler: Vergi Kapasitesi; Vergi Çabası, Vergi Politikası, Panel Veri Analizi
JEL Sınıflandırması: H20, E62, 023

Keywords

Vergi Kapasitesi Panel Veri Analizi Vergi Çabası Vergi Politikası

References

  • Alfirman, L. (2003). Estimating stochastic frontier tax potential: can Indonesian local governments increase tax revenues under decentralization? (Working Paper 03-19). Retrieved from University of Colorado, Center for Economic Analysis Department of Economics website: https://www.colorado.edu/economics/sites/default/files/attached-files/wp03-19.pdf
  • Amoh, J. K. (2019). An estimation of the taxable capacity, tax effort and tax burden of an emerging economy: evidence from Ghana. International Journal of Economics and Financial Issues, 9(3), 12-21. https://doi.org/10.32479/ijefi.7549
  • Andoh, F. K. (2017). Taxable capacity and effort of Ghana’s value-added tax. African Review of Economics and Finance, 9(2), 255-284. https://www.ajol.info/index.php/aref/article/view/164555
  • Atsan, E. (2017). The determinants of tax capacity and tax effort in Turkey for the period of 1984-2012. Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 10(4), 214-234. https://doi.org/10.25287/ohuiibf.339753
  • Aydin, M. and Bozatli, O. (2022). Do transport taxes reduce air pollution in the top 10 countries with the highest transport tax revenues? A country-specific panel data analysis. Environmental Science and Pollution Research, 29(36), 54181-54192. https://doi.org/10.1007/s11356-022-19651-8
  • Bahl, R. (1972). A representative tax system approach to measuring tax effort in developing countries. IMF Staff Papers, 1, 87-124. https://doi.org/10.2307/3866441
  • Bahl, R. W. (1971). A regression approach to tax effort and tax ratio analysis. IMF Staff Papers,18(3), 570-612. https://doi.org/10.2307/3866315
  • Baltagi, B. H., and Wu, P. X. (1999). Unequally spaced panel data regressıons wıth ar(1) dısturbances. Econometric Theory, 15(6), 814-823. https://doi.org/10.1017/s0266466699156020
  • Bird, R. M., Martinez-Vazquez, J., & Torgler, B. (2008). Tax effort in developing countries and high income countries: the impact of corruption, voice and accountability. Economic Analysis and Policy, 38(1), 55-71. https://doi.org/10.1016/S0313-5926(08)50006-3
  • Bird, R. M., Martinez-Vazquez, J., & Torgler, B. (2014). Societal institutions and tax effort in developing countries. Annals of Economics and Finance, 15(1), 301-351. http://ftp.aefweb.net/AefArticles/aef150107Bird.pdf
  • Bozatlı, O. (2021). Dual income tax system and applicability in Turkey. Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 30(1), 92-104. https://doi.org/10.35379/cusosbil.818358
  • Brafu-Insaidoo, W. and Obeng, C. K. (2020). Estimating Ghana’s tax capacity and effort. (Working Paper, 338). Retrieved from African Economic Research Consortium, Research Department website: https://aercafrica.org/wp-content/uploads/2020/04/Research-paper-388.pdf
  • Breusch, T. S. and Pagan, A. R. (1980). The lagrange multiplier test and its applications to model specification in econometrics. The Review of Economic Studies, 47(1), 239-253. https://doi.org/10.2307/2297111
  • Brun, J.-F. and Diakite, M. (2016). Tax potential and tax effort: an empirical estimation for non-resource tax revenue and vat’s revenue (Working Paper, 10). Retrieved from CERDİ website: https://shs.hal.science/halshs-01332053/document
  • Chelliah, R. J., Baas, H. J., & Kelly, M. R. (1975). Tax ratios and tax effort in developing countries, 1969-71, IMF Staff Papers, 22(1), 187-205. https://doi.org/10.2307/3866592
  • Chigome, J. and Robinson, Z. (2021). Determinants of tax capacity and tax effort ın Southern Afrıca: an empirical analysis. Applied Economics, 53(60), 6927-6943. https://doi.org/10.1080/00036846.2021.1954593
  • Cyan, M., Martinez-Vazquez, J., & Vulovic, V. (2013). Measuring tax effort: does the estimation approach matter and should effort be linked to expenditure goals? (Working Paper, 13-08). Retrieved from Georgia State University, International Center for Public Policy website: https://scholarworks.gsu.edu/icepp/39
  • Dalamagas, B., Palaios, P., & Tantos, S. (2019). A new approach to measuring tax effort. Economies, 7(3), 77. https://doi.org/10.3390/economies7030077
  • Dalton, H. (1954). Principles of public finance (23. bs). London: Routledge & Kegan Paul LTD.
  • Davoodi, H. R. and Grigorian, D. A. (2007). Tax potential vs. tax effort: a cross-country analysis of Armenia’s stubbornly low tax collection (Working Paper, 07/106). Retrieved from International Monetary Fund website: https://doi.org/10.5089/9781451866704.001.A001
  • Eltony, M. N. (2002). The determinants of tax effort in Arab countries (Working Paper, 207). Retrieved from International Monetary Fund, Arab Planning Institute website: https://www.scpd.gov.kw/archive/2019/workpapers/19.pdf
  • Eurostat. (2023). Tax revenue statistics [Data Base]. Retrieved from: https://ec.europa.eu/eurostat
  • Fenochietto, R. and Pessino, C. (2013). Understanding countries’ tax effort (Working Paper, 13-224) Retrieved from International Monetary Fund website: https://doi.org/10.5089/9781484301272.001
  • Garg, S., Goyal, A., & Pal, R. (2017). Why tax effort falls short of tax capacity in Indian States: A stochastic frontier approach. Public Finance Review, 45(2), 232-259. https://doi.org/DOI:10.1177/1091142115623855
  • Gujarati, D. N. and Porter, D. C. (2009). Basic econometrics (5. eds). New York: McGraw-Hill Irwin.
  • Gupta, A.S. (2007). determinants of tax revenue efforts in developing countries (Working Paper, 08-184) Retrieved from International Monetary Fund website: https://doi.org/10.5089/9781451867480.001
  • Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251-1271. https://doi.org/10.2307/1913827
  • Huang, J.-T., Lo, K.-T., & She, P.-W. (2012). The impact of fiscal decentralization on tax effort of China’s local governments after the tax sharing system. The Singapore Economic Review, 57(01), 1250005. https://doi.org/10.1142/S0217590812500051
  • IMF. (2023). Financial development and financial inclusion [Data Base]. Retrieved from: https://www.imf.org/en/Data
  • Kawadia, G. and Suryawanshi, A. K. (2023). Tax effort of the Indian States from 2001–2002 to 2016–2017: a stochastic frontier approach. Millennial Asia, 14(1), 85-101. https://doi.org/10.1177/09763996211027053
  • Kızıltan, M. (2018). Analysis of local tax effort in Turkey with the new economic geography models approach (2007-2014) (Doctorate Thesis). Retrieved from: http://www.openaccess.hacettepe.edu.tr:8080/xmlui/handle/11655/5363?show=full
  • Langford, B. and Ohlenburg, T. (2016). Tax revenue potential and effort an empirical investigation (Working Paper, S-43202-UGA-1). Retrieved form International Growth Centre website: https://www.theigc.org/sites/default/files/2016/01/Langford-Ohlenburg-2016-Working-paper.pdf
  • Le, T. M., Moreno-Dodson, B., & Bayraktar, N. (2012). Tax capacity and tax effort: extended cross-country analysis from 1994 to 2009 (Working Paper, 6252). Retrieved form The World Bank website: https://doi.org/10.1596/1813-9450-6252
  • Le, T. M., Moreno-Dodson, B., & Rojchaichaninthorn, J. (2008). Expanding taxable capacity and reaching revenue potential: cross-country analysis. Proceedings. Annual Conference on Taxation and Minutes of the Annual Meeting of the National Tax Association, 101, 384-397. https://doi.org/10.1596/1813-9450-4559
  • Liesegang, C. and Runkel, M. (2018). Tax competition and fiscal equalization under corporate income taxation. International Tax and Public Finance, 25(2), 311-324. https://doi.org/10.1007/s10797-017-9451-6
  • Lotz, J. R. and Morss, E. R. (1970). A theory of tax level determinants for developing countries. Economic Development and Cultural Change, 18(3), 328-341. https://doi.org/10.1086/450436
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There are 64 citations in total.

Details

Primary Language English
Subjects Policy of Treasury
Journal Section Articles
Authors

Şeref Can Serin 0000-0001-8575-9128

Murat Demir 0000-0002-1466-1104

Publication Date December 21, 2023
Published in Issue Year 2023 Volume: 30 Issue: 4

Cite

APA Serin, Ş. C., & Demir, M. (2023). Tax Capacity and Tax Effort in Turkiye and the European Union Countries: An Empirical Application. Yönetim Ve Ekonomi Dergisi, 30(4), 817-840. https://doi.org/10.18657/yonveek.1274445
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