President Tayyip Erdogan has announced the new ‘good news’ before the general elections. Among them are forgiveness for suspended driver’s licenses and tax debt restructuring.
The tax amnesty comes as the latest in a series of public spending programs in Turkey, including a significant increase in the minimum wage and an early retirement scheme that is expected to cost the budget more than $13 billion.
The public spending will boost economic activity in the first quarter, but in the longer term the government’s unconventional economic measures are “unsustainable” and will exacerbate inflation, potentially plunging the country into a recession in the third quarter after the elections, JP Morgan said recently.
After last Monday’s Cabinet Meeting, President Erdoğan AKP announced the details of the “new debt restructuring package”, which is actually a debt amnesty for tax cheats and scoundrels of all types, because “restructuring” doesn’t even preserve the principle of the collectible, much less the opportunity cost to the Finance Ministry of carrying unpaid debts on its balance sheet.
PA Turkey summarizes the main articles of the proposed legislation, which shall be the 13th AKP-legislated tax amnesty over the last two decades.
WHAT DOES DEBT STRUCTURING COVER?
“We are preparing a law proposal that restructures the receivables of our institutions such as tax offices, customs directorates, Social Security Institution, municipalities, special provincial administrations, as well as Turkey’s investment promotion agency. With this proposal, we intend to ease the burden of income tax and social security premium obligations of our citizens and companies. We abolish the accumulated interest penalties on the debts. With the arrangement we will make, we grant those in tax arrears the opportunity to erase all these debts at a very low interest rate to be paid in 48 monthly installments. Since lawsuits between the Tax Authority and the defendant will also be within the scope of the amnesty, we give the parties the opportunity to end the disputes with minimum penalties. The objective of the proposal is to ensure a broader tax base and clean the credit records of delinquent businesses in order to allow them access to bank financing and eligibility in state procurement tenders”, proclaimed Erdogan in his speech announcing the Amnesty.
Erdogan had already forgiven accumulated interest on higher education loan debts. Now, only the principal of the loan will be paid back. We hope that our comprehensive application and configuration proposal will be beneficial to all those who fell behind in payments to state because of economic hardship”, added the President.
WHCIH TAX LIABILITIES BE CLEARED?
Erdogan heralded that all tax debt no more than 2 thousand liras will be written off.
HOW MANY MONTHS ARE THE DEBT STRUCTURING INSTALLMENTS?
Nebati, the Minister of Treasury and Finance, said, “In the proposal, we also include provisions which allow for a retroactive increase in the tax liability and correction of business inventories for the years 2018 to 2021. Those businesses voluntarily restating their tax liabilities and reporting the true value of their inventories will not be subject to tax inspection and assessment. Moreover, if paid in full, the outstanding tax debt will actually be reduced by 10 percent. Another important innovation restructuring debts on monthly basis spread over 4 years, which had in the past been limited to 2 or three years. they will be able to pay in 48 installments in instalments. The proposed legislation also offers discounts to those who want to pay in a shorter time. If the restructured debts are paid in advance, 90 percent of accumulated interest will be forgiven.
WHEN WILL THE TAX AMENDMENT BE AVAILABLE?
Stating that the issue will come to the agenda of the parliament as soon as possible, Nebati said that he is expecting the Grand Assembly to prioritize floor voting on the legislation. Only debts and outstanding fees due 31 Dec 2022 are covered.
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