In the fight against inflation, and especially in the effort to bring inflation, which is as high as it is in Turkey, down to a controllable level, a holistic focus on the economy is an inevitable necessity in addition to monetary policy tools. The Ministry of Treasury and Finance has been working on fiscal measures that will increase the effectiveness of fiscal policy and support the disinflation process that will start in the second half of the year.
Immediately after the March 31 local elections, a series of measures are expected to be implemented as of early April. The fiscal space created by these measures is expected to finance structural reforms and increase productivity in the economy. Treasury and Finance Minister Mehmet Simsek referred to these measures as “tax reform” without going into detail. According to the limited information available to us, the fiscal work is moving in two main directions;
1) Elimination of exemptions, exceptions and tax immunities that have accumulated over the years and have lost their effectiveness
2) Attempting to partially eliminate the relative injustice in taxation, improving the imbalance of blessings and burdens to the detriment of wage earners, and addressing taxable areas (such as owning a large number of houses for investment purposes).
Tax on investment properties on the way
The Ministry of Treasury and Finance is preparing to tax people who own more than one house for investment purposes more. Housing has become a profitable investment area during the turbulent period in the economy. The gradual increase in real estate tax and title deed fees in purchase and sale according to the number of houses stands out among the regulations being considered. The proposed regulation is expected to limit the unnecessary demand for housing, which leads to a rapid increase in rents, and to encourage first-time homeowners. In terms of the budget, this new revenue source is expected to make a significant contribution to the fiscal space that is being created.
Tax exemptions will be reduced
The exemptions and tax immunity advantages that have been granted to various segments of the tax legislation for years, many of them incalculably, have now become an enormous burden. The pandemic and electoral economy conditions have further expanded the tax advantages and riddled the tax legislation with holes. Just as the Central Bank is trying to simplify hundreds of macroprudential measures and get rid of some of them, the Ministry of Finance is preparing to reduce the exemptions and exceptions in the legislation that have lost their effectiveness and lead to injustice. These regulations, which are used by fiscal policy to stimulate the economy, are only effective if they are valid for a temporary period. These regulations, which have become almost permanent, continue to remain in the legislation in a way that causes tax losses to the state even though they have completed their function.
