The Determinants of Tax Revenue: The Case of Turkey

Abstract

Tax is the most basic public financing instrument of the treasury. Tax is an important instrument of fiscal policy as well as its role in financing public investment and public services. For these reasons, it is imperative for all countries must achieve a stable level of tax that allows public needs to be met. Economic and financial factors affecting the performance of tax revenue play an important role in the determination and implementation of tax policies. This study investigated the determinants of tax revenues in Turkey. For this purpose, the effect of USD/TL exchange rate, M2 money supply, industrial production index, deposit interest rate, unemployment rate and export variables, which are considered to be effective on the tax level, on the tax level in Turkey for the period 2006M1- 2022M11 within monthly observations, is analyzed by ARDL methods. The empirical findings reveal that there is a cointegration relationship between tax revenues and all series. According to the long-run coefficient estimates, M2 money supply, industrial production index and deposit interest rate affect the tax level positively, while unemployment rate and USD/TL exchange rate affect the tax level negatively.