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Redistribution Effects of Taxes on Expenditure: The Case of Turkey (2002-2013)

Hakki HakanYilmaz (), Mehmet Ali Ozyer () and Serap Inci Ozyer ()
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Hakki HakanYilmaz: University of Ankara
Mehmet Ali Ozyer: Turkish Court of Accounts
Serap Inci Ozyer: Central Bank of Turkey

Hacienda Pública Española / Review of Public Economics, 2019, vol. 230, issue 3, 11-40

Abstract: Tax and transfer policies have been main research areas in reducing income inequality, which gained great importance particularly in the last century. Economists, who focused on this area, argue that unlike income tax, a well-designed expenditure tax might be more efficient in reducing income inequality because it is easier to manage, does not levy a tax on capital income, and does not discriminate between current and future consumption. In this study, redistributive effects of taxes on expenditures are investigated based on the household budget survey micro data of TURKSTAT, which represents a great share of the indirect taxes. It is found that the impact of taxes on goods and services on inequality is not significant by the analyses that are based on sequential revenue tranches of indices and total consumption distribution in terms of gross and net consumption shares, the Gini coefficients, decile ratios and Kakwani index. Very close to zero and negative in the relevant period, Kakwani index implies that expenditure taxes in Turkey can be considered regressive and increase the inequality. By comparing total consumption expenditures, amount paid on expenditure taxes, and household disposable incomes; it is indicated that households at the bottom of the distribution are on average net spenders, and consumption taxes increase the gap between the poor and the rich.

Keywords: Household consumption; consumption taxes; redistribution; inequality and tax policy (search for similar items in EconPapers)
JEL-codes: E21 H23 H31 (search for similar items in EconPapers)
Date: 2019
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