Government pledges to bring in more taxes for rich, prevent ‘exceptions’

Government pledges to bring in more taxes for rich, prevent ‘exceptions’

ANKARA - Hürriyet Daily News
Government pledges to bring in more taxes for rich, prevent ‘exceptions’

Expensive waterside mansions by Istanbul’s Bosphorus are seen. Hürriyet photo

A new income tax code will aim to remove a number of exceptions and increase taxes on the rich, preventing unearned incomes in expensive assets and ending the informality in many sectors, Finance Minister Mehmet Şimşek said at a press meeting on Dec. 30.

“Changing or increasing income tax rates are not on the agenda, but we will reduce and/or abolish some exceptions,” said Şimşek adding that the new income tax law was still in the draft phase and that they planned to present it to Parliament in the first half of 2013.

Şimşek stated that the new regulation would target those who had more than one income source - such as interests, rents, and dividends. Such individuals will have to declare their incomes in total instead of separately, and they will pay taxes according to their correct tax bracket.

“The withholding rate will be 15 percent of annual incomes below 100,000 Turkish Liras and 35 percent above this amount. A citizen who has a 10,000 lira income per year will pay 15 percent of it, while another who has 120,000 liras in total - with interests, rents, dividends - will be obliged to declare all their revenue and will be taxed according to their correct tax bracket.”

The new tax will prevent unearned incomes in expensive assets, in parallel with the West, said Şimşek.

“Think about if you have bought a plot without construction permission. At the moment, by the time conditions have changed you have received permission and prices have increased. Your income will not be taxed because you have possessed that plot for five years. However, in parallel with regulations in the West, the new law will tax all income from your assets and also cancel the time limit [five years],” he said.

Şimşek emphasized that everyone would pay taxes in accordance with their revenue level, adding that inflation, amortization, and other factors would be taken into account.

The Value Added Tax (VAT) rates on real estate are still being worked out, but Şimşek underlined that those who buy high value houses will pay high taxes.

New criteria for VAT

“The current VAT rate for houses below 150 square meters is 1 percent, while it is 18 percent for  houses bigger than this. However, the square meter calculation is not reliable for real estate tax justice, as the value of a house can change due to its location and its construction quality. We have yet to made final decisions on this,” he said.

Şimşek said the difference between the real estate tax value and market value should be eliminated by a model in which the Finance Ministry will accumulate within its own system all estate prices declared on all websites and in newspapers.

The ministry is also carrying out investigations into “informality” in 18 sectors, Şimşek added, pointing out that electronic materials, cigarettes, tea production, exchange offices, oil and LPG, glasses, and intra-city transportation were all being examined.

With regard to the struggle against loan sharks, Şimşek said that all POS devices would be integrated with cash registers and that the system would complete all invoices automatically.