Economist and writer Mahfi Aylmes, in an article assessing the truth and fallacies of the new tax, wrote a formula to save Turkey from being a haven for underground finance, untaxed and unregistered transactions and remove it from the grey list: a package of regulations prepared by the Ministry of Finance. Aylmes’ article, titled “Proposals for a New Tax Package,” reads as follows:
If you look at the tax system that is planned to be introduced in the news, you will see that, as always, the responsibility lies with the people, not with the wrong economic policies of the past three years or the people who implemented them. You may not be able to participate in some plans included in the package. Tax tips are regulations that expose people to the risk of tax administration and tax investigations, and they are never worth the reward.
International departure fees were wrong from the start
The increase in the international departure fee is also wrong. It was wrong to charge such a fee in the first place. Taxes are collected free of charge from citizens as a contribution to public services, but fees are collected from citizens as payment for the public services they receive. When citizens go abroad, no public services are provided. According to passport regulations, the service has already been paid for by the passport fee being charged, so the international departure fee is an unfounded charge.
The exemption for foundation donations should be removed
It is right to abolish some special exemptions and exemptions from income tax and corporate tax. However, the exception that needs to be removed is not the exception for property tax levied on housing. The exemption for donations to associations and foundations should be removed. If they are given an exemption, they will no longer be donations, but will be turned into a tool for tax avoidance and convenience.
Expense statements to consider
There are many issues with this tax system that need to be criticized, and tax experts are going to put this issue on the agenda in the coming days. One issue in particular needs attention – expense reporting. The offer states; “As a result of risk analysis, taxpayers who have a discrepancy of 20% or more between their declared income and expenses will be asked to submit special expenses (expenses), and if they cannot explain the difference, a tax audit will be conducted.” It is assumed that the unjust difference related to the person in question will be taxed as miscellaneous income.
Why would we want a discrepancy of more than 20%?
As can be seen from the regulation, several conditions must be met to exempt taxes in this way. (1) First, a risk analysis is carried out. Who will do it, whether permission is required, what criteria will be considered, etc. There is no explanation of such issues in the text. It will probably be decided by a communique to be released in the future. (2) There is a difference of more than 20% between the income and expenses to be declared. I did not understand why such a ratio is necessary. Does a difference between income and expenses of less than 20% mean that the difference is small? There are people in this country who live below the starvation line, so it is pointless to look for such differences. (3) In the case of such differences, the taxpayer is asked to declare special expenses. That is, this notification is not made from the beginning together with the income tax return. I do not think this is the right approach. The declaration of assets and expenses must be submitted to the tax office from the beginning together with the income tax return. (4) The difference between income and expenses should not be explained, and a tax investigation should be conducted on the taxpayer. But all these investigations should be done from the beginning and the taxpayer should be asked at the end. (5) If there is a difference, it must be subject to income tax as an incidental gain.
What was it like before 1984?
First, a brief explanation of the situation before 1984. Article 114 of the Income Tax Law No. 193, adopted on December 31, 1960, contained the following provision: . However, persons with limited liability who are required to declare real estate capital income, wages, commercial income, agricultural income, and professional income, which are determined by the Omnibus Law, or the total of these, are not subject to asset declaration. ” Article 115 of the same law explains that if the total amount of declared assets exceeds the total amount of assets declared in the previous year’s declaration and the difference exceeds the declared income obtained between the two periods, the excess income amount will be taken into account. It will be taxed as undeclared income. Two more important points to note in this application: (1) The asset declaration includes not only the property of the declarant himself, but also the property of his family members. (2) The difference discovered by the asset declaration investigation will be taxed, but smuggling fines will not be applied.
Decisions of the Özal Administration and Their Impact
This provision was repealed by Law No. 2995 of April 18, 1984. From that date on, asset declarations were no longer accepted and it was no longer possible to conduct investigations based on what had been received with respect to the past. These two systems were very effective from 1960 to 1984, when asset declarations and the complementary expenditure declarations were implemented. Wealth was not recorded as much as it is today, but financial inspectors and tax experts (only these two experts had the authority to investigate wealth declarations) contacted the Land Registry, the Real Estate Tax Office and the banks to inspect wealth and discover those who were committing fraudulent acts, who hid their wealth or income and collected taxes. These two notices largely prevent non-taxation and non-taxation. However, the Özal regime could not withstand the pressure and repealed both of these declarations, which opened Pandora’s box and made Turkey more and more exposed to undeclared wealth, that is, people who drive the latest model cars and live in luxurious mansions but pay little tax. As the minimum wage, it became a country for money laundering.
Going back to the 1960 frame is one thing.
One way to stop Turkey becoming a haven for underground finance and turn it into a decent country is to revive asset and expense declarations within the 1960 framework. In that case, an amnesty clause could be introduced for those who have a difference between their asset increase and their income by 2023, and a provision could be made that “those who voluntarily declare this difference and pay 25% of the difference as tax are eligible. , There will be no asset investigation or penalties for the previous year. ” That would allow for a large amount of tax to be collected and exemptions from items included in the bill, such as international departure fees, taxes on tips, and the abolition of the deduction for real estate capital gains. The benefits would outweigh the costs.
Drafted in 1998 by then Minister of Finance Zekeriya Temizel and popularly known as the “Where Did You Find It” Law, it empowered the Ministry of Finance to investigate the origins of taxpayers’ wealth and their connections. It investigated income and earnings, and if there was a difference, whether they had paid taxes, introducing a mechanism similar to a wealth test. Scheduled to come into force from early 1999, the law’s implementation was postponed to January 1, 2003, to be implemented after the elections. The AKP won the elections and, as one of its first acts, repealed the law with Law No. 4783 on January 9, 2003.
In summary, if the practice of asset and expense declarations is reintroduced within the 1960 framework and the discrepancies that arose in the past on the condition of tax payment are eliminated, full-scale collection will be achieved in this way and no collection will take place. A lot of regulations are needed that will garner public reaction. This regulation will also save Turkey from a haven of black money, untaxed and unregistered transactions and ensure its removal from the grey list. However, I do not think that the AKP will be able to do this, considering its approach to the law that you found in 2003.
You can read Mahfi Eğilmez’s articles on his blog: https://www.mahfiegilmez.com/
