Impact of Tax Increases on Citizens during Economic Crises

Impact of Tax Increases on Citizens during Economic Crises

  • 04.12.2023
  • 02:17:53

Economic downturns are times when a country's economic activity is generally low, unemployment rises and financial difficulties are experienced. Governments consider various policies to stimulate the economy and finance public spending during these challenging times. These policies include increasing the Special Consumption Tax (SCT) and tax rates. However, the impact of such tax increases on citizens should be evaluated from different perspectives.

Fiscal Burden
Increases in excise duties and taxes have a direct impact on citizens' incomes. In times of crisis, it may be inevitable for governments to raise revenues to cover budget deficits. In this case, raising excise and tax rates can reduce consumer spending and savings. Citizens who have to pay higher taxes may find it difficult to make ends meet with the remaining income. This could increase the financial burden on citizens and reduce their standard of living.

Consumer Spending
SCT increases may have a negative impact on consumer spending, especially when applied to luxury and unnecessary goods. Citizens may be forced to save money or forgo non-essential goods due to higher tax burdens. In times of crisis, this could further deepen the economic contraction and reduce business sales.

Inflation and Purchasing Power
SCT and tax increases have a direct impact on consumer prices. In particular, increases on basic goods or services can increase inflation and reduce citizens' purchasing power. High inflation can lead to a reduction in the purchasing power of income, and an increase in the cost of living can strain family budgets.

Unemployment and Economic Growth
Increases in excise duties and taxes can affect businesses' operations and increase production costs. In this case, businesses may resort to laying off workers or reducing production to offset costs. As a result, unemployment rates may increase and economic growth may be negatively affected.

Social Inequality
Tax increases in times of economic crisis can deepen inequality between income groups. Those with higher incomes may pay more in taxes, while those with lower incomes may pay a lighter tax burden. This may reinforce the perception of social inequality and injustice in society.

Conclusion
In times of economic crisis, SCT and tax increases are frequently considered by governments to close budget deficits and stimulate the economy. However, the effects of these increases on citizens should be carefully evaluated. If implemented in a balanced and fair manner, tax increases can lower citizens' living standards, reduce consumer spending and negatively affect economic growth. In times of crisis, it is critical that governments adopt a balanced and fair approach to designing and implementing tax policies that protect the economic welfare of citizens.