Abstract:

As well as in developing countries today, budget gap has become a major problem. There are discussions in the countries about the need to increase public income or reduce public spending in order to reduce the budget gap. In the reduction of budget gap, the determination of the relationship between public expenditure and tax income through the method of causal analysis and the determination of the relationship between them plays an important role in the determination of the financial policies to be implemented. For the purpose of determining this relationship, the study used monthly data covering the year 2006-2021 of the public expenditure of the central administration and the tax income of the central administration. Fourier Shin’s integration test found a long-term relationship between public spending and tax income. The causal relationship between public expenditure and tax income was studied by the Toda-Yamamoto test and found a one-way causal relationship from tax income to public expenditure. The empirical results obtained from the study show that the tax-expensing hypothesis between public spending and tax revenues in Turkey is valid. The tax-expense hypothesis is based on the basis of reducing tax revenues to reduce budget gap.

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