Mehmet Simsek to go after tax evaders to narrow budget deficit

Turkish administration is proposing a slew of new measures to raise new revenue, without increasing tax rates. A package to cut waste and inefficiency in the civil service promised TL100 bn (ca $3.3 bn)  savings over a year but was widely derided as impossible to implement and trivial in its impact. Now, AK Party officials are poised to announce plans for a new tax package, including a prepaid tax system for certain professions and adjustments to ensure tax fairness, according to reporter Yucel Kayaoglu of Turkiye newspaper.


As the government begins work on a new tax package, an “advance, or withholding tax” system for doctors, engineers, dentists, and some freelance groups has been proposed, where taxes would be collected first and offsetts to occur at the end of the tax period, when returns are filed.

The new tax package, aimed at ensuring tax justice and reducing the share of indirect taxes in general tax revenues, will include regulations targeting individuals and occupational groups with  inconsistencies between their income and taxes paid.

AK Party officials’ proposal

Türkiye’s ruling AK Party officials stated in an impact analysis study that doctors, engineers, dentists, or some freelance groups will face tax adjustments. “When you look at some professions, they lead a luxurious life, driving the latest model cars. Having these requires a good income. However, when you look at their tax payments, there is no harmony with their income. There are even those who pay no taxes as if they don’t earn anything. We want to prevent this,” party officials said.

AK Party sources indicated that a “prepaid tax” system for freelance groups is on the agenda. “Taxes should be collected upfront, and then taxpayers can submit their returns. Offset will occur at the end of the tax period. This method prevents tax evasion because no one wants to be subject to tax audits. If the declared income is shown lower than the tax paid, they know they will be audited.”


Simsek promises minimum corporate tax

Mehmet Simsek  promised to announce new measures to raise revenue for the Treasury, with a Minimum Corporate Tax requirement for  companies, according to AK Party officials. “In our study, we saw that, for example, even the top 100 firms nationwide in terms of tax obligations,  the tax they pay enters the treasury but immediately exits. This is because, due to exceptions, incentives, and exemptions, this tax does not stay in the treasury.


With the plan we are proposing, even if they benefit from exceptions or have exemptions, they will still have to pay at least 15% of their corporate tax.”


Changes to procurement law

After the tax package, exceptions in the Public Procurement Law will also be reconsidered. AK Party sources stated. “Currently, state institutions want to expedite purchases of goods or services by labeling these ‘Urgent’  to bypass the Public Tender Law. This will be prevented. The scope of exceptions will be narrowed down. There are more than 30 exceptions. These will be reduced.

The administration also intends to narrow the scope of Article 21; which allows tenders to be conducted through bargaining for unforeseen events such as natural disasters, epidemic diseases, or imminent risks of life or property loss, or for urgent construction techniques or ensuring the safety of buildings or life and property. Tenders conducted through bargaining allow invited bidders to submit offers without public announcement. This method has led to debates about the transparency of tenders.


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.