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Türkiye’s ruling AK Party has new tax package: Prepaid taxes for professionals

Türkiye's ruling AK Party has new tax package: Prepaid taxes for professionals
By Yucel Kayaoglu
Jun 2, 2024 10:49 AM

As the government begins work on a new tax package, a “prepaid tax” system for doctors, engineers, dentists, and some freelance groups has been proposed, where taxes would be collected first and declarations made later, with offsetting to occur at the end of the tax period.

The new tax package, aimed at ensuring tax justice and reducing the share of indirect taxes in general tax revenues, will include regulations targeting individuals with inconsistencies between their income and taxes paid.

AK Party officials’ proposal

Türkiye’s ruling AK Party officials stated in an impact analysis study that doctors, engineers, dentists, or some freelance groups will face tax adjustments. “When you look at some professions, they lead a luxurious life with the latest model cars or luxury living. Having these requires a good income. However, when you look at their tax payments, there is no harmony with their income. There are even those who pay no taxes as if they don’t earn anything. We want to prevent this,” party officials said.

AK Party sources indicated that a “prepaid tax” system for freelance groups is on the agenda. “Taxes should be collected upfront, and then they can submit their declarations. Offset will occur at the end of the tax period. This method prevents tax evasion because no one wants to be subject to tax audits. If the declared income is shown lower than the tax paid, they know they will be audited.”

Treasury in-and-out

The Minimum Corporate Tax application is not only for global companies but also for domestic companies, according to AK Party officials. “In our study, we saw that, for example, even the top 100 firms nationwide in terms of tax base, the tax they pay enters the treasury but immediately exits. This is because, due to exceptions, incentives, and exemptions, this tax does not stay in the treasury. With the plan we are proposing, even if they benefit from exceptions or have exemptions, they will still have to pay at least 15% of their corporate tax.”

Changes to procurement law

After the tax package, exceptions in the Public Procurement Law will also be reconsidered. AK Party sources stated. “Currently, public institutions want to make purchases of goods or services by saying ‘Urgent’ and taking refuge in these exceptions. This will be prevented. The scope of exceptions will be narrowed down. There are more than 30 exceptions. These will be reduced. In addition, Article 21 of the law, which regulates the bargaining procedure, will be reconsidered. Especially, tenders under this article will be subject to strict rules. Because many public institutions want to make tenders under this article.”

Article 21 of the law allows for tenders to be conducted through bargaining for unforeseen events such as natural disasters, epidemic diseases, or imminent risks of life or property loss, or for urgent construction techniques or ensuring the safety of buildings or life and property. It also allows for tenders to be conducted through bargaining for unforeseen events that the administration did not previously anticipate. Tenders conducted through bargaining allow invited bidders to submit offers without public announcement. This method has led to debates about the transparency of tenders.

Last Updated:  Jun 5, 2024 6:31 PM