Seismic Changes In Turkey

By Global Tax Weekly

Reforming a country’s tax code can often be an agonizing process. Often, it starts with the formation of a panel of experts or parliamentarians, charged with studying various options for reform. Then, the panel will publish a report detailing where the tax system is failing, and proposing ways in which it can be fixed. The report will then be submitted to parliament or the government, upon which the finance minister will laud the great work and dedication of the panel and its chairman. Within a week of this, it’ll probably be forgotten about. Or, if a tax reform bill is eventually drawn up, it will be so divisive as to be virtually impossible to approve, with the result that it gets batted back and forth between lower and upper chambers, finance committees, and constitutional courts. Some members of the legislature with a particular interest in tax reform will try to keep the issue in the Government’s consciousness, and the Government will be reminded on a regular basis by the IMF, the OECD, et al, not to forget about that tax reform bill it promised. But rarely does a country manage to make a clean sweep of its tax code. So, it was refreshing to read that Turkey is on the brink of making fairly seismic changes to its tax legislation, a process that so far has taken a relatively brisk two years. The draft tax code will merge the two separate laws for the taxation of corporate and individual income, and by all accounts will strip away many overlapping and confusing provisions, reducing the number of articles by 200 to about 320. Of course, one of the main aims is to bring more people into the tax net and widen the tax base – i.e. it will raise revenue – but it is also said that the changes will make Turkey a considerably easier place to do business, so it merits an encomium.

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