Özet:

Many studies regarding the relations between tax revenues and public expenditures in Turkey conclude that total tax revenues have been utilized to finance public expenditures. Additional to existing literature, this study investigates the relations between tax revenue components and public expenditures, and searches the evidence of tax illusion. This study utilizes the Johansen co-integration test to search long-run relations and the error correction model and Granger causality test to search short-run relations by employing yearly Turkish data for the period of 1975 to 2004. The empirical findings imply that there is one way causality running from public expenditures to indirect tax revenues, and no causality between direct tax revenues and public expenditures. In addition, findings indicating consumption tax revenues are mainly used to finance public expenditures show that tax illusion exists in the Turkish economy.

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