The plunder of tax and investment incentives continues at full speed

An economy that has forgotten about production and is trying to survive by offering the world's highest interest rates on hot money... If we look at it from the perspective of distribution, an unprecedented transfer of wealth is taking place due to unprecedented monetary and fiscal policies and sticky inflation.

Eighty percent of the population has been pushed below the poverty line. The expenditures made for the sultanate of the palace and the further enrichment of government cronies are inflating budget deficits more and more every day. To ensure this sultanate continues, the state has set its sights on the incomes of retirees, workers, and farmers. Those who add wealth to their wealth not only do not pay taxes but also cannot get enough of the incentives provided by the state.

Everyone knows that companies and self-employed individuals filing tax returns have not been paying taxes for years. I wrote about taxes, incentives, and the plunder of coastal areas on June 23, June 30, and July 14 regarding the new tax regulations introduced by Mehmet Şimşek, which do not really touch the wealthy but weigh heavily on the oppressed public. The debate flared up again last week. Both Minister of Finance Mehmet Şimşek and Vice President Cevdet Yılmaz admitted that companies are not taxed due to tax exemptions and various exceptions. The Minister of Tourism also allocated land that is a natural and archaeological protected site to his own company, bypassing the law despite a Council of State cancellation.

Everyone says that no one in Turkey pays taxes, but what is not discussed is this: How much tax is not paid or evaded?

Looking through the window of the Ministry of Finance, I do not know what kind of calculation the finance experts make. But when I look at the macro figures, the tax potential I find is 20 trillion liras... Considering the 8 trillion to be collected in 2024, there is a loss, evasion, and tax that the state knowingly and willingly does not collect, amounting to 12 trillion liras. I wrote about this in 12 Punto on June 23. Let us continue the discussion.

I arrived at the approximately 12 trillion lira tax evasion figure through two separate channels. The first estimation method is as follows:

According to the 2024 budget targets, approximately 6 trillion liras in indirect taxes and fees will be collected in Turkey. The share of indirect taxes in Turkey is 70 percent... This is an unhealthy ratio. In modern European countries, indirect taxes are 30 percent, and direct taxes are 70 percent... If a country collects around 6 trillion liras in indirect taxes, the amount of direct tax to be collected according to the 30/70 ratio of contemporary country standards is 14 trillion liras.

So, how much direct tax are we paying instead of 14 trillion liras?

2 trillion 464 billion liras. In 2024, workers and civil servants will pay 1 trillion 93 billion liras of this.

The 1 million 143 thousand companies and 2.5 million self-employed individuals in Turkey pay a total of 1 trillion 370 billion liras. They evade a large portion of the approximately 12 trillion liras, and the state does not collect another portion under the pretext of incentives or enriching religious foundations. Let us give two current examples for the magnitude of the 12 trillion that is evaded or not collected.

The social security (SGK) debts of municipalities, which are making noise these days, are 90 billion liras. That is 7 per thousand of the evaded or uncollected taxes. Or, the 25 percent raise given to retiree pensions has added a burden of 33 billion to the budget in six months... It is not even 3 per thousand of the evaded and uncollected taxes...

The second argument that we can claim Turkey's total tax potential is 20-22 trillion liras is the ratio of total tax revenues to national income. In developed countries, this ratio varies between 40 percent and 55 percent. Turkey's projected national income for 2024 is 41 trillion liras... 50 percent of it already exceeds 20 trillion liras.

Again, on Sunday, June 30, in 12 Punto, we wrote about the distortion in tax incentives provided under the name of investment allowance and made a proposal. I think this proposal should be repeated frequently and take its place on the political agenda.

Let us give an example. A company's 2023 profit is 32 billion Turkish Liras. It should pay 7 billion 590 million liras in taxes at a rate of 23 percent. This company is not evading taxes, but the state is not collecting them. The state says, "If you make a new investment, I will provide you with exemptions."

The company we are discussing in the example pays only 133 million liras in taxes instead of 7 billion 590 million liras at 23 percent. Only 4 per thousand of its profit...

The question that gets lost in the chaos of these incentives and needs to be asked is: Who is the owner of this new investment made? Is it the partners of this company, or the state that does not collect taxes and therefore the 85 million citizens?

Since taxes are not collected from profits under the name of new investment, then the company should increase its capital by the amount of the new investment and transfer shares equivalent to the new investment to the state.

There are also taxes that the state has given up on collecting due to donations made to religious foundations that it has declared as beneficial to the public. The situation has completely gone off the rails. I will write a separate article on this subject.

PLUNDER UNDER THE NAME OF INCENTIVES

In addition to uncollected taxes and incentives, there are lands that the state transfers for free or for next to nothing. You allocate land to friends, acquaintances, relatives, and cronies for 49 years. Tax incentives are not enough; you provide cash support. You pay personnel salaries, you pay SGK premiums. In fact, the citizens pay for all of these. This type of incentive plunder is seen in both industrial companies and tourism.

The most shameless of these allocations came to the agenda last week. Minister of Tourism Mehmet Ersoy allocated land to himself to build a hotel in Bodrum's Kissebükü Bay. The Minister had requested the same place from the Ministry of Tourism 10 years ago, and the allocation of the place, which is both an archaeological and natural protected site, was canceled by the Council of State upon the objection of local residents. However, during this government's term, people close to the government, and even civil servants and advisors, do not care about court decisions, starting with the Constitutional Court. The owner of the company applying for a place that should not be touched and the person making the allocation are the same person... The current Minister of Tourism...

In state administration, besides fearing the law, there should also be a sense of shame... It is another indicator that we are experiencing multiple decay and collapse in every field...

On July 14, I shared the conversation I had with Bahattin Yücel, one of the former Ministers of Tourism, about tourism investments and incentives in 12 Punto. Let me summarize:

"I am allocating the environment and nature to you. I am allocating Ephesus, Side, Bodrum, Halicarnassus, and as many ancient assets as you can count. I am promoting with the taxes I collect from everyone, with everyone's money. I call it economic activity and I build all your infrastructure and roads with the taxes I collect from everyone again. I finance the investment you make, and the other investments of the companies you own, by giving up taxes under the name of supporting resource utilization. By deducting the investment you make from taxes, I am essentially making it myself. But as a society and as a state, I cannot benefit from any of these. Moreover, you do not pay taxes either."

Both are Ministers of Tourism... One from the old Turkey, one from the new Turkey... The plunder under the name of taxes, incentives, public lands, and investment incentives with the nation's money continues at full speed.