Bad news for retirees: They may receive a 'zero' raise in July

It has been claimed that the base salary regulation, which directly concerns approximately 3.6 million retirees whose salaries remain below 10,000 liras, was not included in the omnibus bill draft that the government is expected to submit to the Grand National Assembly of Turkey (TBMM) in July.

According to the report on ekonomim.com, despite criticisms that retirees earning below 10,000 TL would not be able to benefit from the July raise if a base salary regulation is not implemented, this clause was not included in the draft.

However, 5 articles were added to the omnibus bill draft by the Social Security Institution (SGK).

HOW IS THE RAISE FOR BASE SALARY CALCULATED?

If a retiree with a base salary of 8,000 TL is expected to receive an estimated 6-month inflation adjustment of 25 percent, and the lowest pension figure of 10,000 TL is not increased at all, they will not be able to benefit from the proportional raise. This is because the individual's salary will have been topped up to 10,000 TL. In this case, the retiree in question will have received a 'zero' salary raise.

THE MINISTRY OF FINANCE ADDED 50 ARTICLES

Approximately 50 of the tax articles that have been debated in the public eye for weeks were included in the omnibus bill draft. Many articles were added to the draft by the Ministry of Finance, such as a clause aimed at preventing VAT fraud through zombie companies, a minimum corporate tax for domestic and foreign companies, a clause increasing the corporate tax from 25 percent to 30 percent for companies undertaking Build-Operate-Transfer (BOT) and Public-Private Partnership (PPP) projects, the taxation of unregistered motorcycle couriers, and a 10-fold increase in the international departure fee.

WHICH ARTICLES WERE REMOVED FROM THE OMNIBUS BILL DRAFT?

Wealth tax: The Revenue Administration requested that taxpayers with a discrepancy of over 20 percent between their declared income and their expenditures be required to submit a special expense declaration, and that a wealth tax be levied on the unexplained difference. This article was removed from the draft.

Capital gains tax on the stock market: According to the article prepared to levy taxes on gains from the sale of stocks traded on Borsa Istanbul (BIST) held for less than 3 years, the tax to be deducted from stock market gains was planned to be 10 percent for up to 3 months, 7.5 percent for up to 6 months, 5 percent for up to 1 year, 2.5 percent for up to 3 years, and 0 percent for over 3 years, depending on the holding period of the stocks. However, this article in the draft was withdrawn.

10 percent VAT on feed, 20 percent on fertilizer: The Revenue Administration proposed that, as previously applied in Turkey, a 10 percent VAT be levied on feed sales and a 20 percent VAT on fertilizer sales. Currently, a 1 percent VAT is applied to both products. It was proposed that if the VAT is increased, direct support payments should be made to farmers from the Ministry of Agriculture and Forestry budget. In this context, based on 2023 sales, an annual revenue impact of 15 billion liras from feed and approximately 19 billion liras from fertilizer was expected. It was also requested that the VAT exemption applied to those engaged in R&D, innovation, and design activities not covered by the investment incentive certificate be abolished. This critical article was also removed from the draft.

Sale at real value in the title deed: One of the articles added to the draft was that property taxes and title deed fees should be collected based on the regional fair market value of real estate, rather than the value used for property tax purposes (municipal valuation). While work was underway to collect title deed fees and property tax payments based on regional fair market value prices determined through appraisals, it was decided to remove this article from the draft.

20 percent withholding tax on rent and tax on multiple homes: According to the article proposed by the Revenue Administration, the tenant would deposit their rent into the bank every month. The bank would deduct 20 percent of the rent money falling into the account as tax and send it to the Ministry of Finance, leaving the remainder in the landlord's account. It was calculated that the state would collect 40 billion liras in rental tax from landlords with the implementation of withholding tax on rent. Additionally, it was requested that extra tax be levied on those who own more than one house. However, both articles were removed from the draft. On the other hand, although a consensus was reached on making rental contracts via e-Government, no steps were taken on this matter in the draft.

Abolition of tax exemption on books: Under Law No. 3065, the delivery of printed books and periodicals is exempt from VAT. It was proposed to abolish this exemption on the grounds that it was determined that the exemption was also applied to publications and stationery products not covered by the exemption in practice, and that taxpayers were also able to reclaim general expenses and fixed asset (ATİK) input VAT due to the exemption. A total revenue of 2.3 billion TL was targeted with the abolition of this exemption. This article was also not accepted.

Abolition of tax exemption for simple-method tradesmen: One of the most critical articles requested by the Revenue Administration was the abolition of the simple-method tax exemption, which concerns approximately 850,000 tradesmen, in metropolitan cities, and the transition to real taxation for these tradesmen. The article, which would directly affect those engaged in businesses such as taxi drivers, barbers, carpenters, plumbers, haberdashers, and tailors, was not added to the draft.

International departure fee: The increase rate for the international departure fee, which ekonomim.com announced to the public, was set at 10 times, and it took its place in the draft to be increased from 150 TL to 1,500 TL. The critical detail of the article is that the international departure fee will be increased by the revaluation rate every year. This means that the fee will increase exponentially over the years.

Providing cash support instead of SCT exemption for the disabled: The Ministry of Family and Social Services proposed abolishing the Special Consumption Tax (SCT) exemptions applied to the disabled and providing cash support instead. However, this proposal was not included in the draft. Although the SCT exemption for vehicles will continue for the disabled, it is envisaged that the period of benefiting from this, which is currently every five years, will be increased to 10 years. The article was included in the draft in this form.

Delay interest on administrative fines: It was requested that a regulation be made in the Misdemeanors Law to apply delay interest to all administrative fines, covering administrative fines followed up according to the Enforcement and Bankruptcy Law. However, this article was not added to the draft.

Equalization of BAĞ-KUR and SSK premium days: Following the EYT (Retirement Age) regulation, no article regarding the equalization of the number of premium days for small tradesmen registered with Bağ-Kur with those of employees registered with SSK was included in the tax package. The government, which is struggling to bear the financial burden coming from the EYT, does not look favorably on the regulation that would pave the way for approximately 1 million Bağ-Kur members to retire 5 years earlier.