THE CORRELATION BETWEEN FISCALITY RATE, GDP AND TAX INCOMES. CASE STUDY ROMANIA AND TURKEY

Dracea, Raluca and Cristea, Mirela and Ionascu, Costel and Irtes, Meltem (2008): THE CORRELATION BETWEEN FISCALITY RATE, GDP AND TAX INCOMES. CASE STUDY ROMANIA AND TURKEY.

Abstract

The academic literature analyzes the fiscality concern from all points of view, and the question which pressed upon the theoreticians and also the practitioners of the last decades remains: which is the adequate level of the fiscality? The difficulty in answering the question consists in opposite interests: on one hand, the government is willing to acquire the highest level due to the ascendant tendency of public expenses; on the other hand, the tax payers long for a much reduced level in order to dispose of more financial funds. Considering the theory of Arthur Laffer as well as the premise that the taxation structure (flat or progressive tax) is less important than the general level of taxation (tax burden), the purpose of this paper consists in the empirical analysis of the correlation between the tax pressure rate, GDP and the tax incomes flux within two States which adopt different tax systems: Romania and Turkey. For this purpose, we have described the methodology of creating the Laffer curve for Romania and Turkey and we have applied the methods concerning the analysis between the GDP and real tax systems, as well as those methods which estimate the empirical tendency of the fiscality rate within the two States, mentioned above, taking into account the parameters which determine it. The conclusion indicates the existence of a correlation between the real GDP and the real tax incomes, strongly manifested in Turkey (progressive tax system) as compared to Romania (flat tax system). Romania provides an optimistic position, based on standard tendencies which confirm the theory of Arthur Laffer within other countries in Eastern Europe.

• Item Type: MPRA Paper
• Language: English
• Keywords: Laffer curve fiscality rate tax incomes static statistical analysis correlations
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation

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