The Effects of tax amnesties on tax revenues and shadow economy in Turkey

Kara, Hüseyin
This thesis analyzes tax revenue and shadow economy implications of tax amnesties in Turkey after 1985. Cross-examination of amnesty effects was carried out through Ordinary Least Squares regression and Error Correction Model. In addition to amnesty years, pre and post effects of amnesties on revenue and shadow economy are analyzed. Results indicate that none of the amnesties necessarily display an escalating behavior for tax revenue except for 1988 amnesty. 1988 amnesty is found to increase tax revenue both in previous and actual years of the amnesty. Although results are in line with the previous literature on tax amnesties, amnesty implications are not very transparent since the frequency of amnesty practices is very high and they have mixed effects in Turkey. A similar conclusion is drawn for shadow economy as well. To begin with, shadow economy size is calculated through using ‘Currency Demand Approach’. In the next step, separate estimations are conducted with shadow economy calculations by MIMIC and Currency Demand approaches. Results are confirmative; it is estimated that 2002 amnesty alleviate the shadow economy size significantly, while its effects may also be influenced by 2001 amnesty. 2008 amnesty is appeared to increase the shadow economy size according to both estimations.