Vice president hints at tax reform

ANKARA

The government will broaden the tax base and increase the share of direct taxes, Vice President Cevdet Yılmaz has said.

“There have been criticisms such as ‘too high a tax burden,’” Yılmaz said on Dec. 12 during his speech in the parliamentary talks on the government’s 2024 budget.

“According to the latest data published by the OECD for 2022, our country has the third lowest tax burden among 38 OECD countries with 20.8 percent,” Yılmaz said.

“Let us not forget that the same number was 23.8 percent in 2002. In these 20 years, we have not increased the tax burden; on the contrary, the tax burden as a percentage of national income has decreased.”

Yılmaz reiterated the government’s determination to “broaden the tax base.”

“Broadening the tax base does not mean taxing low-income people; broadening the tax base means taxing those who do not pay taxes,” he added.

“’Let's tax those at the bottom and not those at the top,’ we definitely do not have that understanding. On the contrary, as you know, we charge 30 percent corporate tax from financial institutions, banks, 25 percent from companies, 20 percent from exporters. We have excluded the minimum wage from the tax; this alone means a loss of tax revenue of 600 billion Turkish Liras.”

The vice president acknowledged that indirect taxes dominate the state’s income.

“But when we adjust these indirect taxes, we also take into account the distribution of income,” he said.

“For example, we keep VAT much lower on food consumed by the masses, much higher on luxury goods, higher on imported goods, and lower on domestic goods. It is true that everyone pays indirect taxes, but consumption patterns are different. So, we adjust our indirect tax rates in favor of our low-income citizens.”

In the coming period, the government will make tax reforms with such perspective, Yılmaz said.

“We will broaden the tax base and increase the share of direct taxes,” he added.

“This does not mean that total taxes will increase; we will increase the share of direct taxes in total taxes. We will ensure simplicity in taxation and eliminate ineffective exemptions. Most of the exemptions are either for a social purpose or a requirement of an incentive policy, but if there are ineffective exemptions, we will of course remove them. We will support foreign exchange earning activities and increase tax certainty.”

Yılmaz also noted that the government continues the fight against inflation decisively.

“But while reducing inflation, we must also prioritize growth, employment, and social balance, while addressing the needs of those in need,” he added.

“We are fighting inflation while maintaining these balances. Our goal is to gradually reduce inflation to single digits. By the middle of next year, we expect to see a significant decline. Starting in the second half of 2024, we anticipate inflation falling to much lower levels, around 15 percent in 2025, and reaching single digits again in 2026. Our long-term perspective is focused on 2053.”