Gov't signals comprehensive tax reform

Vice President Cevdet Yılmaz has said there are strong demands from the labor and employer sectors on taxation and that he supports these demands, pointing to radical changes.

"This is an issue we should work on," Yılmaz said after meeting with representatives of the business world as part of preparations for the Medium-Term Program (MTP) to be announced next month.

" It should not be evaluated as an increase or decrease in taxes," Yılmaz added.

"Let's call it modernizing, simplifying and balancing the tax system."

Yılmaz's statement raised questions about what kind of tax reform might be possible. The fact that there is a demand to reduce indirect taxes and increase the share of direct taxes has drawn attention to the MTP and development programs to be announced in September.

The tax reform is expected to be based on elements such as simplifying and balancing the system, broadening the tax base and reducing informality.

"I would like to say that all segments of society, employers and employees, are expecting a tax reform," Yılmaz noted. "There is an expectation to increase the share of direct taxes. There is an expectation for a tax system that ensures social justice on the one hand and maintains public revenues on the other. I also support this demand."

Tax revenues are composed of direct taxes, such as income and corporate taxes, and indirect taxes, such as Value-Added Tax (VAT) and Special Consumption Tax (ÖTV).

Since the 2000s, the share of indirect taxes in tax revenues has been above 60 percent, usually around 65-66 percent. Reducing indirect taxes, which cause inequality in terms of income justice since they are levied on everyone at the same rate, has been on the agenda for years.

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