Determinants of fuel smuggling in Türkiye (1990-2023)<sup></sup>

Smuggling activities have long been debated in economics due to their potential positive and negative externalities. Fuel smuggling is a significant issue that requires attention, as Türkiye has limited fuel and natural gas reserves, while its neighbouring countries possess abundant resources. The loss of tax revenue from fuel smuggling results in substantial revenue declines for governments. This study aims to analyse the factors influencing fuel smuggling in Türkiye from 1990 to 2023. Unlike other research, it uses a dataset that includes the quantities of seized smuggled fuel and the corresponding tax revenue loss over this period. The potential causal relationships among nine independent variables believed to be related to fuel smuggling were examined using the Toda-Yamamoto causality test. The results show bidirectional causality between tax revenue loss from fuel smuggling and actual tax revenues. Additionally, there is a causal link from tax loss due to fuel smuggling to the energy dependency ratio, and a unidirectional causality from dealer profit margins to tax revenue loss from fuel smuggling. The findings also indicate that smuggling activities declined during the period when Unmanned Aerial Vehicles were effectively used to combat smuggling in Türkiye.