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Vergide Gündem
English Translation

Does Turkey’s digital economy taxation lead

“protectionism?

The period that we’re experiencing stands out as the “digital age”. Having a “virtual
environment” is just enough to sell goods and deliver services. A fixed workplace is
not required to operate in another country today. Companies like AirBnB, Alibaba,
Twitter, Facebook and Instagram are among examples. ”Market values“of these
companies are expressed in billions of dollars. Well, are digital companies easy to
tax?

Let's take a quick look at the question”How are these companies perceived in the
public?

1. Why do digital companies capture attention?

Digital companies do not derive their income solely from markets “legal or with
business centers”. Their access to online users proves sufficient to acquire income.

However, the debate starts when it comes to the “tax perception on digital
companies”. Tax authorities of the developed and developing countries and the
public do not think that these companies are taxed enough. A survey covering the
European Union (EU) indicates that 75 % of Europeans expect urgent EU action
in the fight against tax avoidance and evasion caused by the digital companies.
Because, 75 % of the participants think that companies that are dealing with
activities based on “digital business models” hold their tax burden at low levels due
to the existing international tax laws.

Digital business models allow digital companies to operate without “physical
workplace”. While the taxation rules based on physical workplace were applicable
prior to the digitalization of economy, they are not efficient in understanding the
digital company income since the value chain in digital economy has changed. For
instance, you needn’t buy any tapes or CDs to listen to music. Through a music
application, meeting your need for listening to the music rapidly and at a low cost,
even at no cost has become possible.

Many countries believe that digital companies derive high incomes within their
markets and those companies should be taxed for that income as the country
of origin. In that context countries, including Turkey, have been enacting tax
regulations concerning the taxation of digital economy under the categories of
“reverse charge VAT”, “turnover” or “equalization tax”.
2. Is there a global solution for the taxation of digital economy?

Governments are closely monitoring the tax burdens of digital companies. G20
countries including Turkey took action for the taxation of digital companies. The
G20 conducted a detailed study called Base Erosion and Profit Shifting (BEPS)
on the taxation of these companies with the leadership of the OECD. The OECD
published an interim report indicating the taxation challenges of the digital
economy. However, the OECD failed to offer a taxation method for member
countries. OECD cannot develop a proposal since the member countries fall short of
building consensus.

10 Nisan 2019