Critical ruling from the Constitutional Court: Presidential authority on VAT revoked

The Constitutional Court (AYM) has revoked yet another controversial power transferred to the President under an "omnibus law." According to the decision published in the Official Gazette, the regulation that transferred the authority to partially or completely eliminate the right to VAT refunds or deductions to the executive branch has been annulled.

WHY WAS THE REGULATION ANNULLED?

With the Omnibus Law No. 7491, an amendment was made to Article 36 of the Value Added Tax Law, granting the President the authority to narrow the scope of VAT refunds or abolish them entirely. However, the Constitutional Court ruled that this authority was inconsistent with Articles 7 and 73 of the Constitution.

Article 73 of the Constitution states that taxes and financial obligations must be imposed and abolished by law. While the President is only granted the authority to make changes to rates, the transfer of a fundamental practice such as the "revocation of the right to a refund" to the executive branch was deemed an overreach of legislative power.

"THE RULE IN TAXATION IS THE LAW"

According to the assessment of economic expert Abdullah Tolu, the Ministry of Treasury and Finance planned to transfer this authority to the executive branch as a practical solution because it was struggling to issue VAT refunds due to various exemptions. However, the Constitutional Court reiterated the following principle in its decision:

"The fundamental rule in taxation is that taxes must be imposed, abolished, and amended by law."

The court stated that even the authority to restrict the right to a refund cannot be transferred to any body other than the legislature.

SIMILAR AUTHORITY WAS ALSO ANNULLED IN 2008

This decision by the Constitutional Court also recalled a similar process that occurred in the past. In 2008, VAT refunds in the tourism sector were restricted through authority granted to the Council of Ministers, but the Council of State and the Constitutional Court found this regulation to be unconstitutional and annulled it.

News Source: 12punto