Cyprus-Forum.com

[boomerang]

Are you sure abouit those figures? Six million taxpayers in a population of 80 million? Somehow it cannot be right. There must be a source of funds to pay civils servants, army etc, not to mention ambitious public works, that cannot be coming from less than one tenth of the population.

I agree this why I posted the article...This is the point I was making..."turkey=fascists state" seems to be a cash driven economy, and this in part could explain the heavy borrowings and reliance on the IMF for the bail outs...Correct me if I am wrong but, "turkey=fascists state" is in the mists of securing another line of credit form the IMF...

[Big Al]

Are you sure abouit those figures? Six million taxpayers in a population of 80 million? Somehow it cannot be right. There must be a source of funds to pay civils servants, army etc, not to mention ambitious public works, that cannot be coming from less than one tenth of the population.

I agree this why I posted the article...This is the point I was making..."turkey=fascists state" seems to be a cash driven economy, and this in part could explain the heavy borrowings and reliance on the IMF for the bail outs...Correct me if I am wrong but, "turkey=fascists state" is in the mists of securing another line of credit form the IMF...

Boomers,
Are we still on this topic???
It has as such to do with the Cyprus problem as the Zimbabwe elections. To a more interesting topic, i see Mr Carl Williams is appealing his 35 year sentence for the murder of the Morans. Dont know about Vic but in NSW the interest in the Melbourne underworld killings is huge.

[Tim Drayton]

I assume that we are referring to the Turkish Republic here (I can find no country called Turkey=fascist state in any atlas). The figure we are discussing is the number of "vergi mükellef", i.e. people who present their own tax declarations to the tax office based on their business activities. Salaried employees have their income tax deducted directly from their wages and do not fall into this category.

I remember being told by a Turkish citizen who knew Britian quite well that the main difference between the two countries is that in Britain the state is rich and the people are poor, while in Turkey the state is poor and the people are rich. I would agree. Most economic transactions in Turkey are unrecorded and untaxed. A vast amount of wealth exists in the form of hoarded gold. Official economic figures from Turkey are pure fiction - include the informal, unrecorded economy and I am sure Turkish GDP would be boosted by three times at one blow. One of the main failures of successive Turkish governments has been to raise tax and this explains the consistently parlous state of public finances in the country. Turkey is actually a lot richer and has a much stronger economy than people think - just look at the way it keeps bouncing back from crisis after crisis.

I ran a business in Turkey for a few years in the nineties I can assure you that, unless things have changed there radically in the last decade, accounting in Turkey is an exercise of pure fiction. The state imposes such punitive rates of tax (I think it ends up being 70 or 80%) on the amount of income that you actually declare that you have no choice but to practice avoidance. If you worked strictly by the book you would go out of business. It is a kind of game - the government knows that everybody is practising tax avoidance on a grand scale so it imposes a huge rate of tax on the small amount of income that you actually do declare. They even have what is called a 'life-style tax' which you have to pay even if you declare a loss. The government in effect is saying: 'OK you declared a loss, but if you are running a business then you must actually be making money, so I want my cut'.

Nikitas answers how the governement can operate with such a low tax base. You should remember that we are only talking about income/corporation tax here. The Turkish government also compensates for the low levels of income tax that it raises with high VAT rates and by imposing a whole plethora of stamp duties, fees and withholding taxes, and requirements to have things stamped by the notary public at great expense, in connection with every conceivable form of government transaction and official business. Some of the withholding taxes (known as "stopaj") are amazing. For instance if you put up a sign advertising your business on the exterior of the building, you pay an annual withholding tax on this. If a language school wishes to operate its own canteen, they pay an anual withholding tax for the privilege. The logic in all these cases is that money is being earned, and even if these earnings won't actually turn up in the company's books, the state wants a cut.

It is a huge issue really. There are lines of business, e.g. taxi drivers, where the government does not even bother to look at the books and just lays down a fixed amount of tax that each member of that profession has to pay, regardless of how much they actually earn. Then there is a rule that street traders need pay no tax of any kind, which eliminates a huge section oft he economy from the tax system.

Turkey is much richer than it appears to be from official statistics. If the government there could impose a fair and universal system of taxation, and could get all the hoarded gold into the official banking and financial system, there would be an overnight economic miracle.

This is actually a huge topic, but I hope some of this helps to shed some light on the discussion.

[Tim Drayton]

Some more input on this theme:

http://www.morganstanley.com/views/gef/ ... 1-Tue.html

Tax evasion has destroyed the state’s most fundamental power. When tax evasion becomes widespread, the state loses its influence over macroeconomic and social developments. Regrettably, this is exactly what has happened in Turkey, as the vast scale of tax evasion, especially on non-labour income, not only contributes to fiscal problems but also worsens income inequality. Measuring the degree of tax evasion is a challenging task, but even limited data bring to light a disturbing picture. The ratio of under-reported income to actual income increased from 20.8% in 1996 to 246.6% last year. We scrutinise official tax-return statistics by using notaries as a benchmark (since they cannot complete unrecorded transactions) and found out that income taxes paid by doctors and lawyers are, on average, 3.2% and 4.3%, respectively, of an average notary’s tax bill. No wonder, the Ministry of Finance’s tax inspectors discovered that self-employed taxpayers, like doctors and lawyers, report, on average, just 23% of their actual income and companies declare only 16% of earnings. In other words, those who earn most are also responsible for most of the tax evasion and avoidance (see Of Taxes and Fat Cats, December 14, 2004). Indeed, an interesting investigation cross-checking motor vehicle registrations and tax records (aptly called the ‘left lane’ or ‘right’ if you are driving in Britain) shows that out of 621 individuals in Istanbul owning high-end cars like Ferrari or Porsche, 129 are not registered as taxpayers at all and 212 declared either no income or a loss.

[Nikitas]

After reading Tim's two posts above I now know where Greece got its administration and tax system from!

What he describes was pretty similar to Greek reality till the advent of VAT and the Euro, which put an end to the state's ability to print money and finance some hair brained ideas while causing inflation to reach 35 per cent in the early 80s. Now it is all "six and eight" because the European Central Bank controls the money supply.

In the past I got into trouble here in Greece because I said that Greeks should wake up and realise that the country is a free republic and to stop acting like Ottomans in their administration. Now it is obvious why that made them angry, it was true!

It is amazing that no one state has copied the Russian system of combatting tax evasion- a super simple taxation system, idiot proof tax return forms and a flat rate of 13 per cent income tax.

As for Turkey, someone in their tax office ought to read De Soto's books on capital in developing countries.