Ministry of Finance launches comprehensive audit on inflation adjustment

Minister of Treasury and Finance Mehmet Şimşek stated that they continue to take new steps in line with the principles of justice and efficiency in taxation, and that the Ministry's units are continuing their work in this area without interruption. In this context, he announced that audit work regarding inflation adjustment has been initiated across the country.

Emphasizing that taxpayers who perform inflation adjustment have been taken under review, Şimşek said, "Those deemed risky in the analyses conducted on the balance sheets of these taxpayers will be invited to provide an explanation. Those who do not provide an explanation or whose explanations are not deemed sufficient will be referred for tax inspection."

'OUR TAXPAYERS ACHIEVED AN ASSET INCREASE OF 31.5 TRILLION LIRA WITHOUT PAYING TAX'

Minister of Treasury and Finance Mehmet Şimşek stated that inflation adjustment is "a correction process carried out to ensure that financial statements reflect the true situation," and continued as follows:

"Approximately 1.7 million income and corporate tax payers had the opportunity to adjust their balance sheets at the end of 2023 without tax. Thanks to this, while the total value of assets in the balance sheets of taxpayers before the adjustment as of 2023 was 17.4 trillion lira, this figure rose to 48.9 trillion lira after the adjustment. Thus, our taxpayers achieved an asset increase of 31.5 trillion lira without paying any tax. This increase in the value of assets has offered and continues to offer significant advantages to our taxpayers in terms of cost and depreciation since the beginning of the year."

Şimşek reminded that this year, they postponed the inflation adjustment practice, which would create a tax effect in temporary tax periods, for all taxpayers in the first temporary tax period, and for those with an annual turnover of less than 50 million lira in the second and third temporary tax periods, and stated that they found it appropriate for large taxpayers with a turnover of over 50 million lira to perform inflation adjustment starting from the second temporary tax period.

'THERE ARE TAXPAYERS WHO APPLY IT INCORRECTLY'

Minister of Treasury and Finance Mehmet Şimşek emphasized that numerous incorrect applications and findings evaluated as risks were encountered in the analyses regarding the results of the inflation adjustment practice. Şimşek said, "While taxpayers with strong equity at the end of the period gain tax advantages with inflation adjustment, taxpayers who finance their assets with foreign resources, i.e., debt, may face additional tax after the adjustment. This reflects the main purpose of the practice. In this context, the 2023 and 2024 second temporary tax period declarations of taxpayers who present their balance sheets by performing inflation adjustment are being analyzed."

Drawing attention to taxpayers who apply inflation adjustment incorrectly, Şimşek shared the following examples:

"We have detected that some taxpayers increased their capital in their balance sheets even though they did not register the capital increase with the trade registry. In addition, we have seen that they removed assets such as vehicles, land, and buildings from their balance sheets even though there was no actual sale. Some taxpayers have also made transactions that do not reflect the truth in their balance sheets to avoid the tax effect of inflation adjustment, but these transactions are being caught by our risk parameters."

"NO ACTION WILL BE TAKEN AGAINST THOSE WHOSE EXPLANATION IS DEEMED SUFFICIENT"

Emphasizing that as a result of the invitation to explain, these taxpayers' balance sheets will be brought to the true situation, Şimşek stated that no action will be taken against taxpayers whose explanations are deemed sufficient.

Minister Şimşek stated that those who do not provide an explanation and those whose explanations are not deemed sufficient will be referred for tax inspection, and noted the following:

"These taxpayers can correct their mistakes without waiting for our invitation, so they will not pay any penalties. Incorrect application of inflation adjustment causes a serious tax loss for our Ministry. Within the framework of our principles of justice and efficiency in taxation, we have also started tracking those who cause tax loss by incorrectly applying inflation adjustment. Our audits will continue to increase in all sectors and in all tax practices. We will continue our work in the field without interruption within the framework of our principles of justice and efficiency in taxation."