Turkish Finance Minister Naci Ağbal has recently
announced radical messages about several topics in the Turkish
taxation system that might attract taxpayers and investors. As
an overall observation, Turkey is planning to reshape its
taxation system, especially decreasing the overall tax burden
of corporate income taxpayers. These issues are discussed in
Corporate income tax
The finance minister has announced that the corporate income
tax rate (CIT) may be reduced soon to alleviate the total tax
burden of corporate income taxpayers. The main purpose is to
increase CIT collection and accelerate domestic and foreign
investments in Turkey. In addition, the finance ministry is
working on minimising the possible treasury losses due to such
The CIT rate last time was reduced from 33% to 20% in 2006.
Counter to the reduced rate, it was recorded that the
collection rate of CIT was significantly increased. In
addition, the finance minister has also announced that the
scale of deductible expenses for small-sized enterprises may be
expanded within certain conditions to shrink the volume of the
The Turkish VAT system has generally been exposed to some
concerns about its complexity. The critics claim that the
collection of VAT, the VAT refund mechanism and VAT exemption
structure are not efficient as much as other taxes because of
its complex structure. In principle, Turkish VAT aims to tax
consumption. However, VAT may also cause an additional tax
burden on the producers, especially exporters.
For instance, they purchase intermediate goods with an 18%
VAT, and sell final goods with an 8% VAT. In this sense, the
ministry desires to relieve the VAT burden on producers with a
reform plan on VAT, which aims to simplify the tax base and
rates including VAT exemptions and the refund mechanism.
Excise duties (namely special consumption taxes) have been
one of the crucial taxes among others, respectively with a
share of 23% in overall tax collection, while OECD countries
have a share of 7.5% on average. The finance minister declared
that existing excise duty rates on the applied goods such as
alcohol, tobacco products and motor vehicles are not intended
to be raised anymore.
However, the share of excise duty revenues appears to stay
significant in the coming years. Besides, excise duties on new
goods such as drones might be imposed, based on the press
conference held by the finance minister.
The finance ministry announced that corporate income
taxpayers, which have tax debt but did not apply for
restructuring of their debt when the tax restructuring
programme was in force, will be visited by relevant tax
authorities, and be questioned about their tax position.
Electronic monitoring system for traffic
An electronic monitoring system is used in Turkey to detect
traffic rule violations and collect administrative fines for
those violations. Currently, municipalities administer the
system. The finance minister said that this is going to be
privatised in the near future. This means that there will be
business opportunities for both domestic and international
Overall, Turkey is planning to reshape its taxation system
to provide the financial integration of Turkey into the global
economy. This has been clearly affected by the expected
corporate tax reforms in other countries.
Therefore, we believe that Turkey is on the right track by
planning its future tax landscape. Otherwise, it will not be
possible to catch up with the winds of tax reforms all over the
world and Turkey will fall behind the other countries in the
corporate tax race.
Tahsin Nalcı (firstname.lastname@example.org)
and Eren Güden (email@example.com)
Tel: +90 216 504 20 66 and +90 216 504 20 66