However, the need to pump money to the defense budget because of Syria and Northern Iraq conflicts, new taxes instead of tax rebates began to be talked. Included within the Medium Term Programme and forwarded rapidly with ‘omnibus’ law to the Turkish Great National Assembly, the package offers several arrangements to have impact on our life, such as 25 per cent rise of motor vehicles taxes and 2 points rise at Corporate Tax.

TURKEY WAITS for revisions in taxation since long. As you remember, the tax debates were revived following the Ministry of Finance Naci Ağbal’s statement, in recent months, implying a possible cut in corporate taxes and the examination of the British model and thus, the tax debate was revived. US President Donald Trump’s declaration about a cut in corporate taxes and the worldwide competition increased eventually the expectations. Indeed, “Trump’s sudden decision to cut the corporate tax is not a coincidence. In 2006, we cut the corporate tax rate from 33 per cent to 20 per cent. However, some countries have now corporate taxes lower than ours. I think we should discuss this issue. In some countries, for example in Ireland, various rates are applied” Minister Ağbal had said.

Following this statement, tax cuts in IT, health and energy began to be debated. (however, despite all these facts, there are still expectations that various rates will be applied in these areas.) Amid these predictions, the new Medium Term Programme covering the period 2018-2020 was unveiled. Actually, no one was anticipating ‘a new cut for the finance industry’ but a rise by 2 per cent has been a surprise. The Corporate Taxes were announced to be increased from 20 per cent to 22 per cent in the finance industry criticized since long for its ‘profits’ and ‘high interest rates’ still not lowered. Another tax increase is set for the automotive industry growing without losing momentum in all circumstances. The Motor Vehicles Tax to be paid for cars in 2018 was increased by 40 per cent.

THE PRESIDENCY INTERFERED, MOTOR VEHICLES TAX IS DECREASED

However, with the interference of President Erdoğan, the decrease of motor vehicles tax came on the agenda and the omnibus law has been amended. The motor vehicles tax planned to be 40 per cent for the old vehicles was cut to 15-25 per cent and the motor vehicles tax up to 68 per cent, was cut to around 50s per cent. Meanwhile although the increase about 2 points was only foreseen for the finance industry initially, all corporate taxes were increased from 20 per cent to 22 per cent. As for the Income Tax planned to be increased by 3 per cent, was maintained again at 27 per cent. The reason for these tax increases is explained as follows: “Both our army and police forces struggle against terror and conducts operations in Iraq and Syria at the same time. Within this framework, in order to meet the growing demands, necessary arrangements were made with the purpose of generating new sources to the defense industry fund.”

The goal is to generate a source of 28 billion liras with the introduction of Medium Term Programme. On the other hand, the Minister of Finance began to draft a legal arrangement about the share to be transferred to the Defense Industry Fund to be used as an additional revenue to supply the Defense Industry Fund and an additional income is thus anticipated to obtain for the Defense Industry Fund. Indeed, the allocation of 18.7 billion liras for the modernization expenditures needed by the defense and security forces in the budget for the year 2018, shows the growing share of defense in 2018.

REFORM IS PLANNED FOR ALL TAX LAWS

As the bill of the Ministry of Finance is sent to the Assembly, the following items are stated to increase the public revenues in the Medium Term Programme:

¬ The taxation arrangements will be decided following a thorough assessment including the economic, social and financial dimensions.

¬ The Income Tax Law, the Corporate Tax Law, the Tax Procedure Law and the Value Added Tax Law will be subject to reform to increase the investment, production, employment, export, productivity and competition.

¬In taxation, more benefits are anticipated to be taken from the technological developments, a new risk analysis center will be established to prevent tax evasion and losses.

¬Measures will be taken to rise the income of the regional administrations.

¬ The real estate tax system will be revised.

Corporate Tax in US cut to 20 per cent

THE CORPORATE TAX cut was one of the most important promises during the election campaign of US President Donald Trump. Trump declared that he will cut the Corporate Tax rates form 40 per cent to 15 per cent. However, the tax reform plan unveiled by the House Speaker Paul Ryan foresees to revise this figure to 20 per cent. Ryan stated that the Corporate Tax is planned to be cut to 20 per cent and the goal is to boost growth and investment. He added that US companies operating overseas or keeping their income overseas will be asked to pay one-off tax but he didn’t give details about its percentage. The income tax slices are also planned to be reduced from seven to three and these slices will be respectively 12 per cent, 25 per cent and 35 per cent, Ryan continued. If Trump’s tax reform plan is approved by US Congress, it’s anticipated to come into force before the year end.

CORPORATE TAXES ARE RELATIVELY LOW IN TURKEY

Turkey, with Corporate Tax at 20 per cent, ranks among the countries implementing low corporate taxes. Indeed, the global average stands around 26 per cent. In the European Union too, the Corporate Tax rates are generally high. While EU average is 21.5 per cent, this rate goes higher when the countries like Romania, Bulgaria are excluded.