Basic Problems In Turkish Tax System

Prepared by Özcan AKAR

First of all ,we should know definition of the tax to research a tax system;

Tax is a fee which is charged according to payment’s ability of everyone by government on a product, income, or activity to finance public expenditure. It is public income that is unreturned.

A. Tax burden is on salaried employees (such as teachers, government officer,..) :

Tax rates are very high. For example; income tax and VAT (value-added tax)

Most of taxes are paid by salaried employees with payroll deductions.

In 1990s, %47 of total income tax was paid by salaried employees, %3 of total income tax was paid by traders and %2 of total income tax was paid by farmers.

Enough wealth tax isn’t collected by government.

VAT collected from import has become the most important income at international trade.

In the last thirty years, tax income per capita was increased by 16 times in the OECD (Organization for Economic Co-operation and Development) member countries. It was increased by 21 times in European Union and increased by 21 times in Turkey.

B. Laws are very complicated and difficult to understand :

There are a lot of tax laws and it causes problems.

Frequently changing tax laws has become complicated. Enough preparation term wasn’t given to change and practice tax laws.

Law amendments aren’t result of socio-economic research andpublic support.

This situation causes taxpayers to evade taxes.

The tax administration that has broad authority sometimes

exceeds its limit of authority.

There isn’t any long-term tax policy in Turkish tax system.

C. Unrecorded economy couldn’t be prevent :

Taxpayers can’t pay their taxes because of high inflation and

unbalanced income distribution.

Unrecorded economy created its resources itself.

If Turkish Tax Administration doesn’t take precautions

radically or reform, unrecorded economy can’t be prevented.

In Turkish economy, banks usually aren’t used by traders so

money that is used for commerce usually isn’t recorded.

Accounting in companies isn’t enough for true taxation.

Taxpayers can beat the tax penalties in a agreement way and

most of tax penalties are aborted by tax courts. In this case, tax

penalties haven’t any importance.

D. People want to make a quick buck :

Government often makes general amnesty

for tax penalties.

Taxpayers don’t have awareness about tax

payment. When they don’t pay taxes, they

think that this is an income for us.

People watch illegalities and inequities

about government on TV , so value judgments

of people are changed. People don’t want to

work and they want to get rich quickly.

E. Tax administration is inadequate about structure and

tax practices :

Turkish Revenue Administration must be regulated. Because,

political impact damaged its structure.

There isn’t any researching and planning for future.

Turkish Revenue Administration usually provides its budget

by increasing taxes rates.

There aren’t enough qualified personnel and technological

tools in Turkish Revenue Administration and there are a lot of

problems about calculating tax bases.

and

The biggest problem of Turkish Tax System:

Why do taxpayers evade tax?

We can rank reasons like the below :

High tax rates.

Taxpayers don’t have awareness of tax payment.

Tax burden isn’t distributed fairly.

According to taxpayers, government doesn’t spend tax revenues

properly.

Taxpayers don’t want to pay their tax regularly because of unfair

tax practices (such as tax amnesties, tax postponing).

Traders usually don’t take invoices for their expenditures. Thus

they can provide discounts.

Traders want to increase their capital in a legal way or not.

Companies don’t have social responsibility or business ethic.

Paying regularly Cheating regularly

Main reason of the tax evasion is not to take or not to give invoice so people in Turkey must have common responsibility about this. Actually, purpose of VAT (value-added tax) system is to provide using documents of commerce.

Unrecorded economy has become widespread so tax revenues are too low now. Tax auditing in Turkish tax system is inadequate. Authority confusion, lack of infrastructure and incoordination at audit units in ministry are main reason of this and there aren’t hierarchy and relation between units. In addition, administrative review and tax review are made by the same group in ministry. In the other words, internal audit and external audit (tax audit) aremade by them. However there must be two different groups. Because, a different specialty group is necessary for only tax audit. Moreover, audit unit in ministry must be regulated.

Government officers in tax offices should behave taxpayers who pay their taxes regularly in a worthily way. Taxpayers must feel respectable themselves. Another problem is about that tax laws are complicated. When tax laws are changed, legislations should be made more understandable. Thus, some problems about practice will be solved in this way.

Accounting record system that is used to record economic events regularly is needed for practicing the tax laws. We can provide the correct relationship between economic results and tax with this system. Modern management systems have been used by enterprises in Turkey for ten years so they have an effective accounting system.

Tax laws shouldn’t be changed in very short intervals. This situation is against juridical stability in finance literature.

If juridical stability is disregarded, situations at the below can occur:Every change in taxes can cause the reaction of taxpayers.The changes can make the administration complicated.Legal conformity can be damaged. This is very important. Because people rely on the laws. Case law can’t develop enough.The integrity of the tax laws can be corrupted.

Permanent changes are made under the name of tax reform in Turkey. In this context, all regulations in the field of tax "reform" would be considered as an incorrect assessment. Also, these changes haven’t been successful because people and organizations that practice them are neglected by legislators.

In Turkey, the government doesn’t collect all of taxes, so it increases the indirect taxes. For example; share of value-added tax, fuel consumption tax, additional tax are %60 of total. Therefore, government should increase amount of taxpayers and unrecorded economy should be prevented, so efficiency of tax offices should be increased and rates of taxes should be decreased.

Government should gain taxpayers’ trust again and show that tax burden is distributed fairly. In this case, civil society organizations have an important role about controlling the public spending of government.

and consequently ;

Government provides resources itself with taxes and decides direction of national economy. If tax revenues are

provided regularly and permanently, government can encourage and support the development of economic

activities, so tax is necessary for economy.