Average effective tax rates on consumption for Turkey: New data and a comparative analysis

Consumption taxes are the most important source of revenues used to finance public spending in Turkey, where the share of taxes on consumption (general and specific) is more than 40%. This study computes the average effective tax rates on consumption for Turkish economy and provides a glimpse of how Turkey stands in comparison with other OECD countries. We provide new estimates, in a comparative perspective, using national income accounts and tax revenue statistics. Average effective tax rates on consumption increased from around 10.5% in 1998 to around 15.5-16.5% in 2012. Turkey has one of the lowest average effective tax rates on consumption in the OECD and the calculated tax rates are very similar to those for Greece in recent years. We present an exercise and show the importance of time-variant consumption taxes to understand the changes in aggregate labor supply in Turkey. We also note that the revision to the national accounts has effects on the calculated tax rates.