THE KHALDUN-LAFFER CURVE REVISITED: A PERSONAL INCOME TAX-BASED ANALYSIS FOR TURKEY


Sen H., Bulut-Cevik Z. B. , KAYA A.

TRANSYLVANIAN REVIEW OF ADMINISTRATIVE SCIENCES, pp.103-118, 2019 (Journal Indexed in SSCI) identifier

  • Publication Type: Article / Article
  • Publication Date: 2019
  • Doi Number: 10.24193/tras.57e.7
  • Title of Journal : TRANSYLVANIAN REVIEW OF ADMINISTRATIVE SCIENCES
  • Page Numbers: pp.103-118

Abstract

This paper focuses on an old but still discussed postulate, the Khaldun-Laffer curve, and empirically applies it to personal income tax by using annual time-series data of Turkey for the period 1970-2015. From our analysis, two fundamental findings emerge: first, Turkish data provides evidence in favor of the Khaldun-Laffer curve, suggesting that there is a non-linearity between tax rates and tax revenue. Second, the optimal tax rate that maximizes revenue from personal income tax is 15.03% against the current rate we estimate at 15.37%. These findings imply that Turkey's current personal income tax rate falls slightly into the prohibitive range of the curve.