Details of a comprehensive tax reform package proposed by the Turkish government aimed at addressing the country’s budget deficit and stabilizing the economy after last year’s devastating earthquakes were revealed by a Turkish news agency on Friday.
Labeled by observers as a “tax tsunami,” the package includes significant changes to the value-added tax (VAT), special consumption tax (SCT) and various other levies, with a projected annual revenue impact of 181 billion Turkish lira ($5.5 billion).
The proposal includes a range of new measures, such as penalties for off-the-books rental payments, increased departure fees for Turkish citizens traveling abroad and the elimination or revision of numerous tax exemptions and deductions.
A notable feature is the introduction of an “Expense Deduction Report” system, closely monitoring earnings for self-employed professionals such as doctors, dentists and business owners like hairdressers and café operators.
The detailed tax package, obtained by the ANKA news agency, outlines revisions to the VAT law, proposing changes such as removing exemptions and canceling refunds in certain cases. Additionally, fines for tenants paying rent in cash will range from TL 7,500 to TL 20 million, with penalties calculated at 10 percent of the amount paid. If tenants self-report cash payments before detection, no fines will be imposed.
The reform also includes compulsory bank payment for all rental transactions. Tax declarations will be mandatory for rental income exceeding 580,000 lira in 2024, with anticipated revenue from this measure estimated at 40 billion lira. In 2023 the number of individuals earning above this threshold was 12,833, while approximately 1.8 million earned below it. The changes are proposed to take effect from January 1, 2025.
Other significant elements include increased scrutiny of commercial and freelance activities, with frequent audits to ensure compliance. Tax exemptions for maritime transport and leisure vessels will be revised, expecting to generate 1 billion lira. Traditional trades such as basket weaving will require a new “Artisan Tax Exemption Certificate,” potentially impacting 1 million individuals and generating an additional 1 billion lira in annual revenue.
The package also includes simplified taxation for tips. Tips left by customers, considered gifts, will be exempt from income tax if certain conditions are met. These include tracking tips through a separate bank account and ensuring that they do not exceed 10 percent of the service charge or the monthly gross minimum wage for employees.
A steep increase in the international travel departure fee from 150 lira to 3,000 lira is projected to raise 12.5 billion lira in six months based on 2023 figures.
The new tax package also targets unauthorized use of point of sale (POS) devices and imposes heavy fines on violators. Enhanced rewards for whistleblowers reporting tax evasion and harsher penalties for non-compliance are also part of the reform.
Vice President Cevdet Yılmaz, addressing concerns over the proposed changes, emphasized the government’s commitment to fiscal discipline and inflation control. He said the measures aim to improve tax fairness and economic stability while minimizing inflationary effects
Turkey’s ambitious tax overhaul seeks to generate an additional 226 billion lira, equivalent to about 0.7 percent of GDP, according to a source familiar with the matter. The plan, crafted in response to increased post-earthquake spending and pre-election outlays, is poised for parliamentary debate later this month. With President Recep Tayyip Erdoğan’s ruling party holding a majority along with its far-right ally, the Nationalist Movement Party (MHP), the legislation is expected to pass.
Treasury and Finance Minister Mehmet Şimşek emphasized the necessity of these reforms to bolster fiscal balances and support public spending, including extensive earthquake recovery costs.
The details of the bill have been widely criticized as many believe that the average citizen will have to pay for the economic mismanagement and corruption of Erdoğan and his cronies.