Page 8 - EY-VG_Eylul_2021_v2

Vergide Gündem
English Translation

Does tax amnesty offer any benefits?

It is still being discussed whether tax amnesties are beneficial or harmful. In this
case, it is established upon the examination of “Tax Amnesties: Theory, Trends
and Certain Alternatives” publication of IMF that results arising from “theoretic
literature, economical proofs and selected countries and case studies of US states”
are explained through drawing attention to advantages and disadvantages of such
amnesties. Summary of explanations:

This publication also covers Turkey and it is stated that tax amnesties in Turkey
are neither successful in providing net revenues in long term nor increasing tax
compliance and the reason behind is explained as tax amnesty programs applied
in Turkey are implemented separately from full scale tax policy amendments or
fundamental improvements made regarding increase the capacity of tax liabilities
and social security premium collection.

Fundamental tax policy target was “not to announce any tax amnesties during
the program” within the Medium-Term Financial Program of 2021-2023 period.
However, due to COVID-19 outbreak, two tax amnesty laws have been introduced
within the last one year.

“Tax base increase” regulations and “tax inspection exemption”, granted to those
benefiting from tax amnesties, which are frequently repeated increases “non-
compliance” instead of “tax compliance” as explained in the preamble of the Law
and creates the expectation of “future tax amnesties” sooner or later. Therefore,
tax inspection could be made within statute of limitation of tax assessment period
and tax inspection exemption should not be included in such tax amnesties even
though tax amnesties including “tax base increase” are introduced. Tax inspection
exemption should not be included in case of a tax base increase and if a different
tax base is established as a result of inspection, options such as calculated tax base
and crediting from increased amount are required for “sustainable taxation” and
“tax equity”.

Tax amnesty expectation in Turkey has become permanent. However, continuing
of tax amnesties with their current positions shall cause negative results in terms
of “tax administration, tax complied taxpayers and other stakeholders” and tax
compliance shall continue to decline.

Let’s review the regulation introducing the opportunity to adjust records in the light
of above explanations.

Those which are currently available but off the record

With the regulation, taxpayers can declare “commodities, machinery, equipment
and fixtures”, which are not recognized on their legal books, to tax office for which
they are VAT taxpayer until 31.8.2021(*). Sales fee to be recognized on legal books
shall not be less than their book value upon their sales and if it is lower, profit shall
be determined according to book value.

Declaration shall be made based on “market values” which shall be determined
by taxpayers or related professional organizations. 50% of VAT rate applicable for
assets recognized accordingly based on their “market values”; and 4% of VAT rate
for “printed books and periodicals” whose deliveries are subject to VAT exemption

8 September 2021