중동부유럽

Fiscal policy is central to not onlymacroeconomic stability and growth, but also to poverty andinequality reduction. This paper provides the mostcomprehensive assessment of the distributional incidence ofTurkey’s fiscal policy to date. It analyzes the combined andindividual incidence of direct and indirect taxes,transfers, and social spending and benchmarks Turkey’sachievements against peer countries. The results show thatfiscal policy significantly reduces income inequality inTurkey, driven by social spending on education and health,and complemented by direct taxes and transfer schemes thatcountervail the inequality-increasing impact of indirecttaxes. At the bottom of the income distribution, targetedtransfers are insufficient to compensate for the effect oftaxes, resulting in net increases in poverty. In the contextof upper-middle-income countries, Turkey’s performance isbelow the median. This is driven by the relatively largernegative impacts of indirect taxes and the more limitedpositive impacts of direct transfers and taxes. From apolicy perspective, the paper contributes to identifyingentry points for improving the equity impact of the fiscalpackage. Among these, targeting the minimum subsistenceallowance (AGI) program toward the poor could be anefficient way forward. More broadly, the study represents aplatform to simulate the distributional implications of avariety of fiscal changes to inform stakeholders and thepolicy debate.