Tax injustice

Alongside other injustices in our country, tax injustice has also been a subject of debate for a long time. However, according to Article 73 of our Constitution, titled "Tax Obligation," everyone is liable to pay taxes according to their financial capacity to cover public expenditures. The fair and balanced distribution of the tax burden is the social objective of fiscal policy.

It is a fact that in our country and around the world, the ability to pay is used as a reference for ensuring tax justice. The ability to pay is not a static but a dynamic concept. What is important here is financial capacity and the level of absolute poverty. Financial capacity emerges at the point where it exceeds the level of absolute poverty. Exceeding the level of absolute poverty represents a threshold where citizens can meet their basic needs such as food, drink, clothing, housing, and heating.

If our citizens can meet their needs such as food, drink, housing, clothing, and heating, they should not be taxpayers. They should only become taxpayers in situations that exceed these basic needs. This is exactly where tax justice and tax injustice begin.

There are three fundamental criteria accepted in our country and around the world to ensure tax justice.

The first is the minimum subsistence allowance; this is the deduction of an amount from the tax or tax base that would cover the minimum needs of an individual or their family. In other words, it is leaving income sufficient for the livelihood of the individual and their family outside of taxation.

The second is progressivity; this is the increase or decrease of the applicable tax rate in the event of an increase or decrease in the tax base. In other words, it means those who earn less pay less tax, and those who earn more pay more tax.

The third is the principle of separation; this is the separate taxation of labor income and capital income. That is, imposing additional taxes on capital income while providing tax deductions and limitations on tax brackets for labor income.

The government has abolished the minimum subsistence allowance, which is an important criterion in the practice of tax-paying capacity. This is not the minimum wage. The progressivity mentioned in the second point—that those who earn less pay less and those who earn more pay more—has lost its reality in practice. In our country, those who earn less are taxed more, and those who earn more are taxed less. Another problem is that corporate tax payers are taxed at a flat rate. While paying corporate tax, wage earners and employees pay progressive taxes. Employees and wage earners pay 60% of income tax. Corporate tax payers, on the other hand, pay 23% of their annual corporate earnings as corporate tax. While the first tax bracket for wage earners is 15%, it rises up to 45% due to progressivity.

Furthermore, since the earnings of wage earners are deducted at the source every month, there is no tax evasion, and they cannot benefit from tax amnesties. However, corporate tax payers are taxed at a flat rate and pay their taxes 17 months later.

When we consider tax evasion, deductions, amnesties issued every year and a half, and tax expenditures (foregone tax), the tax paid by corporate tax payers drops to as low as 8%.

Moreover, we are the country with the most unjust tax system in the world in terms of direct and indirect taxes. Indirect tax is collected from expenditures, and direct tax is collected from income. In our country, 75% of taxes are indirect and 25% are direct. To ensure tax justice, direct taxes should be 75% and indirect taxes should be 25%.

The history of taxation and tax justice is the history of democracy. If there is no tax justice, there is no democracy and no justice in that country.