Substitution Effects Of Tax Burden Alterations Throughout Post-Taxing On Employment: Turkey Case

Abstract

This study aims to question the changes in the tax base in Turkey over the last forty years and the scale effects of the tax burden effects related to these changes. Since tax changes are also associated with deficits in the public sector borrowing requirements, and this phenomenon causes tax increases, it is understood that each increase in tax burdens over the years creates significantly different effects, primarily on employment. These differences were discussed through two main factors, the income effect and the substitution effect, and our study strengthened the meaningfulness of detecting a common effect, especially at the employment level, where the income substitution effect comes to the fore. In this context, the possible effects of current tax burden changes on Turkey's employment and labour supply potential stand out with their income substitution effect in a structure supported by other social policies. This impact scale is also affected by other macro variables that can be expressed with different values and further increases the effectiveness of the tax burden in a structure where possible inflation rates are also effective. In this context, it is thought that in addition to tax increases due to public borrowing requirements, which we consider independent variables, changes in the tax burden. This fact, our main topic, constitutes an essential basis for understanding the increase in employment, labour force participation and labour market values. It has been seen as a critical goal to question whether the increases in employment rates and the positive impact on employment volume in Turkey are linked to a labour demand that may arise in association with the increasing tax burden. However, it is observed that the rising tax burden affects unemployment rates, employment volume and labour supply, but the process has different effects with a fluctuating and highly variable structure.