Turkish government introduces new series of tax hikes on eve of 2012

Following the levying of a recent private consumption tax (ÖTV) on designated products, the government has announced a new series of tax hikes, this time encompassing the motor vehicle tax (MTV) and communication and property taxes.Today’s Zaman had earlier cited economy experts who indicated that the government was expected to introduce a number of new hikes in indirect taxes — or taxes that are not directly paid by an individual to the government such as sales tax – on various products before the end of the year. Taking effect Jan. 1, 2012, the increased tax rates — by 10.26 percent on each — were published in the Official Gazette on Monday.

According to the revised tax rates, owners of vehicles with an engine displacement of less than 1,300 cc now have to pay TL 480 in annual tax on their cars. The annual MTV on cars less than three years old and with an engine displacement of between 1,300 cc and 1,600 cc will be TL 768. The amount of annual MTV on cars from the same age range with engines of between 1,600 cc and 1,800 cc will be TL 1,352 in 2012, while the owner of a car with an engine of between 1,800 cc and 2,000 cc will have to pay an MTV of TL 2,129 in the new year.

A large majority of cars sold in Turkey — 96 percent — in the first 11 months of 2011 were those with an engine size between 1,300 cc and 2,000 cc. The current MTV system in Turkey depends on the cylinder volume and production year of the vehicle. The annual tax amount is more for vehicles with bigger engines and decreases as the vehicle ages. The government had plans to switch to a new MTV system, an emission-based vehicle tax, which is currently used in 17 EU countries. Such an option, however, has not come to the table yet.

Separately, as part of the property tax increase, the tax per square meter for each newly constructed building was increased by 10.26 percent. The private communication tax rate was increased by 10.26 percent. For communication, the tax on new GSM subscriptions has increased to TL 37 from the current TL 34.

Turkish business and consumer organizations had raised concerns that the increased tax rates would lead to a decline in people’s buying power as well as a slowdown in business in the markets. Critics called on the government to take these into consideration when introducing tax hikes.

Pointing to such structural problems, observers have argued that Turkey should expand its tax base, meaning increased focus on direct taxes — such as income tax. In Turkey there are only around 1.7 million taxpayers who actually declare their income and pay tax, an indicator of relatively higher tax evasion. The share of indirect taxes among total taxes collected in the first quarter of 2011 was 66 percent, a sign that the government is still using indirect means to collect revenue from its citizens.

27.12.2011
SOURCE: TODAY’S ZAMAN, İSTANBUL