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The Impact of Value Added Tax on the North Cyprus Economy: A Short Term Assessment = Katma Değer Vergisinin Kuzey Kıbrıs Ekonomisi Üzerine Etkisi : Kısa Dönem Değerlendirmesi

Author(s): Abdul GHAFOOR

Journal: Dogus University Journal
ISSN 1302-6739

Volume: 6;
Issue: 1;
Start page: 98;
Date: 2005;
Original page

Keywords: VAT | Impact of economy | North Cyprus | Short-term assessment | KDV | Ekonomik etki | Kuzey Kıbrıs | Kısa-vadeli değerlendirme

Value added tax was introduced in North Cyprus in 1996 to increase public revenue as well as to harmonize with Turkey and EU member countries. It is however evident that the budget deficit has rather increased after the introduction of VAT. The literature argues that VAT not only has potential to generate enough revenue to reduce the budget deficit but also encourages savings and investments. The question is why could North Cyprus not achieve these objectives? The present study was designed to answer this question. It evaluates the impact of VAT on the North Cyprus economy by using several macroeconomic variables such as total consumption, total domestic savings, public, private and total investments, government purchases, exports and imports. The impact of VAT has been studied through simple regression techniques with dummy variable for policy change.

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