**Author details**

Deniz Aytaç

The influence microvariables have on price elasticity of demand on the other hand is important especially for luxury goods. Firms, aiming to increase their total revenues by reducing demand elasticity for their products, have the purpose of decreasing the vulnerability of their products against price changes. Since brand loyalty, which is one of the primary microvariables firms use within this framework, is high especially in luxury goods as mentioned above,

Created brand loyalty prevents change in consumer preferences by reducing substitution possibilities of luxury goods and decreasing price elasticity of demand. By this way, in a tax that will be applied as part of inverse elasticity rule, luxury goods will be subject to high-rate taxes because of low demand elasticity. And therefore since aforementioned goods share in the consumption basket is very low for lower level income groups and high for higher level income groups, effect of this taxation, which is applied by considering elasticity, might be positive on income distribution. Within this scope, while justice in income distribution is served on one hand, a certain budget revenue of optimal taxation goal is achieved through taxing goods with low demand elasticity at a high rate, and this goal is achieved without damaging any economic decisions or in other words without spoiling economic efficiency. Both inverse elasticity rule and leisure complementary goods, which will change preferences of consumers between working and leisure in favor of working, to be taxed at higher rates play a role. The fact that luxury goods

Beginning from this century, labor market and accordingly preferences between leisure and working started to change. In this context, leisure industry has boomed. In many societies, leisure was equalized with luxury goods such as motor sports and traveling and became a symbol

Thus, luxury goods have been effective in the change of the decision for working as a complementary of leisure. While luxury goods with a declined price elasticity of demand as part of brand loyalty are taxed at a higher rate with regard to inverse elasticity rule; at the same time, preferences of individuals in favor of working were strengthened by imposing taxes on leisure

Keeping in mind that criticisms Atkinson and Stiglitz [42, 43] made with regard to differential consumption taxes in terms of economic efficiency, the assumption that the single rate consumption tax will result efficiently in terms of optimal taxation, and under the agreement that other assumptions of Ramsey rule remain the same, demand elasticity of necessity and luxury goods, which changed with the influence of macrovariables and microvariables, will be able to serve in enabling the aimed public revenue without contradicting justice in income

On the basis of an imperative tradeoff between equality and efficiency assumption, optimal taxation literature which claims that egalitarian redistribution policies of the state will create negative

it affects price elasticity of demand for the goods.

are mostly substitutes of leisure lead to this conclusion.

complementary goods and thus raising the cost of leisure.

distribution under inverse elasticity rule.

of postmodernity [41].

134 Taxes and Taxation Trends

**7. Conclusion**

Address all correspondence to: denizaytac@htit.edu.tr

Departmant of Public Finance, Faculty of Economics and Administrative Sciences, Hitit University, Çorum, Turkey
