TAX EFFORT AND INSTITUTIONAL QUALITY RELATIONSHIP IN TURKEY: AN EMPIRICAL STUDY

Abstract

The purpose of this study is to analyze the relationship between tax effort and institutional quality which have an important place in institutional economics literature. On this purpose, in the first phase of the study for Turkish sample the tax effort is calculated for the period between 1984 and 2007 and in the second phase the relationship between the calculated tax effort index and the index of ?Political Risk Components? calculated by ICRG is analyzed with regression method. The results revealed that institutional quality has weak explanatory power on tax effort, still the lagged values of tax effort were found to have a significant effect on tax effort in time t.