Top boss hits at indirect taxes, asks for big change

ISTANBUL

AA Photo

The lion’s share of indirect tax in the total tax revenues causes a setback in combating the informal economy and hinders the concept of free competition, Turkish Industry and Business Association (TÜSİAD) Chair Ümit Boyner said yesterday.

The words came just days after Boyner’s spat with Prime Minister Recep Tayyip Erdoğan’s over TÜSİAD members’ share in national tax revenues. Erdoğan had said TÜSİAD did not pay enough tax, but Boyner denied the accusations on Twitter, saying all TÜSIAD members paid their fair share as far as taxes were concerned. “Members of TÜSİAD pay 85 percent of the corporate tax – we do our share,” she said.

Boyner’s speech at a symposium on the informal economy touched on the irregularities of the tax structure in Turkey, while also praising the drop in the rate of unregistered employment and action plans carved out by the government to tackle the shadow economy.

Customs and Trade Minister Hayati Yazıcı and a number of other high level officials were in attendance at the event, organized by the Young Businessmen Association of Turkey (TUGİAD), an offshoot of TÜSİAD, according to Anatolia news agency.

According to official data, the rate of unregistered employment has fallen to 40 percent today from 50 percent in 2005, Boyner said, according to a press release issued by TÜSİAD yesterday. The “Action Plan on Combat Strategy against the Informal Economy” and the “National Employment Strategy Document” demonstrate the government’s serious approach on the issue, she said.

Tax reform needed

In addition, Boyner also pointed out that the ratio of tax revenue to national income was nearly on par with developed countries.

The total tax burden, including social security liabilities, is close to 20 percent, according to a TÜSİAD study set to be revealed on Oct. 15, she said. “The average tax burden in OECD countries is about 25 percent. The trend in recent years is quite positive in this regard,” Boyner said.

However, Boyner also emphasized a basic irregularity in the tax structure. “With the latest [tax hikes] the share of indirect tax in Turkey neared 70 percent. It is 30 percent on average in OECD countries … This shows that a very small proportion of tax payers actually pay the bill for public services,” she said.
“The worst thing about the rising share of indirect tax is that it sets back attempts to combat the informal economy, and even may encourage it. As the share of indirect tax collected for the registered economy increases, the concept of free competition in particular is damaged,” Boyner said.

The TÜSİAD head called for a tax reform as she said the current situation was unsustainable, as it disproportionally hits those on low incomes.