THE APPLICATION OF THE LAFFER CURVE IN THE ECONOMY OF TURKEY

Abstract

Laffer curve assumes that in case the spendable income increases after tax, investors tends to make much more investment. In this paper, tax policies were examined over the period of 1980-2014 for Turkish economy through four (4) different models. This includes ADF Unit root test, total tax variable, direct tax variable, and income tax variable. They were tested for each model in order to have a better understanding of how tax policies are appropriate for the Turkish economy in the light of Laffer curve.  For each model, the shape of the Laffer curve was found as a parallel of theoretical expectations. Besides, both tax rates that make tax revenues maximum and minimum were not found appropriate with the theoretical expectation.