Simulating the Turkish Tax System

Tax systems are used for economic and social concerns such as promoting the economic growth or decreasing the income inequality and tax evasion, increasing the social welfare, etc. Researchers argue that the consumption taxes are quite high in Turkey compared to other OECD countries. Since, the proposed tax reform in this study decreases the VAT rate to 15 percent and increases the top statutory income tax rate to 40 percent. This paper constructs and present first set of a 55-period overlapping generations (OLG) model for Turkey to analyze and evaluate the impact of tax reform on macroeconomic variables and welfare. The results show that tax reform provides welfare gains to low and middle-income individuals while highincome individuals suffer