Tax collectors crash Turkish weddings to force scofflaws to pay
March, 08th 2007
Turkish tax collectors are showing up in nightclubs, visiting soccer stadiums and even questioningbrides and grooms as they struggle to force people to pay up in a country where about half the workforce evades taxes.
Finance Minister Kemal Unakitan, offering a carrot to go with the stick, on Jan. 1 hosted a televised ceremony where he handed out plaques to people who paid the highest taxes that year. The Tax Administration even held a contest in which children wrote poems lauding the benefits of tax paying.
``Except for people who work for the government, probably everybody is in some way evading taxes, said Soner Cagaptay, an analyst at the Washington Institute for Near East Policy.
``Its rampant. Its across the board. The government needs to increase income tax revenue to pay debts that equal about 50 percent of gross domestic product as it strives to convince the European Union it is ready to join the bloc. The International Monetary Fund is also demanding improved tax collection as a condition of the $10 billion in loans it has extended to Turkey.
Tax evasion ``reduces the overall growth potential of the Turkish economy because unregistered companies cannot apply for loans, the Paris-based Organization for Economic Cooperation and Development said in an October report.
Only 4 percent of Turkeys 71.8 million people were registered taxpayers in 2004, according to an OECD survey of 45 countries. The figure was 2 ercent in Argentina, the only country that trailed Turkey. By comparison, 76 percent of U.S. citizens were registered taxpayers.
``Its a huge problem in every developing country andmost acute in places that are experiencing rapid growth like Turkey, said Brian Arnold, a lawyer with Goldmans LLP in Toronto who has lectured on international tax collection. ``Inevitably, the tax administration and the tax system do not keep pace with economic development.
To compensate, Turkeys government relies on sales taxes and special duties on items such as electricity and telephone calls for much of its revenue. Levies on goods and services equaled 48 percent of total taxes in 2004, according to the OECD, compared with an average of 32 percent for the groups 30 members. Personal income taxes accounted for 15 percent of Turkeys tax revenue in 2004, compared with an OECD average of 25 percent.
Turkeys Tax Administration hired 400 new auditors this year and will add another 400 next year as the country improves tax collection.
The government has promised the IMF that it will approve a law giving tax inspectors more power to compare the spending of individual taxpayers with their reported incomes.
Parliament will begin debating the measure this week, Economy Minister Ali Babacan told reporters March 1. Companies are being asked to use a Web site to register major purchases or sales to other businesses, so tax collectors can find businesses that underreport income. In January 2006, corporate tax rates were slashed to 20 percent from 30 percent, while top income-tax rates were cut to 35 percent from 40 percent to encourage people to pay. ``The tax burden is high and because of this people try to keep informal, said Bulent Tas, deputy head of the Tax
Administration. ``We want to reduce the tax rate and improve the system. As part of an effort to persuade average citizens to help catch tax evaders, the Tax Administration has produced two television commercials asking people to make sure they get receipts.