In the panel “The Effects of Illegal Trade and Ways of Solution” organized in cooperation with the Ankara Chamber of Commerce (ATO) and the EKONOMİ newspaper, attention was drawn to the effects of the illegal and unregistered economy, which is estimated to have reached a size of USD 250 billion, distorting competition and reducing public revenues with ‘zero tax’.
The panel discussed the impact of illegal and illicit trade, particularly in tobacco and tobacco products, alcoholic beverages and fuel oil, on the economy. In the presentations made within the scope of the conference, attention was drawn to the impact of illegal, smuggled and unregistered economy on the economy by distorting competition and reducing public revenues as well as being a criminal element.
The panel was moderated by Hakan Guldag, Chairman of the Board of Directors of EKONOMİ newspaper, with the participation of Imran Okumus, Chairman of the Petroleum Products Employers’ Union (PÜİS), Hakan A. Yavuz, Lecturer at Ankara Yıldırım Beyazıt University, Emrah Akin, Partner at BDO Turkey and Muhittin Acar, Lecturer at Hacettepe University.
TOBACCO AND TOBACCO PRODUCT SMUGGLING COSTS TRY 80 BILLION
Speaking at the panel, Emrah Akin, partner at BDO Turkey, reminded that Turkey has reached a GDP of around 1 trillion dollars and that the size of the informal economy in Turkey has reached a very large amount of USD 250 billion, even if 25 percent is estimated. Akin underlined that informal trade is a “zero-tax” area as well as its distorting effect.
Stating that they have prepared a report titled Informality in the Tobacco Products and Alcoholic Beverages Market from a Tax Perspective, Akın said that the share of illegal consumption in these products is increasing. Emrah Akın noted that the tax loss from these products is estimated at TRY 80 billion, which is 15.5 percent of the 2023 SCT amount, and said, “The field research conducted for new generation tobacco products shows that the tax loss in these products is around TRY 20 billion.”
Emrah Akin stated that the tax loss from alternative tobacco products alone is estimated to be around TRY 20 billion and that smuggling is a sophisticated organized crime, and reminded that it is likely to be used as a source of finance in a wide range of areas, especially criminal organizations, due to the high profit margin. Akin reminded that SCT is a regulating tax type and argued that the amount of tax, which is at a level that makes smuggling attractive in some products, should be reviewed by taking this effect into account. “Except for some goods such as tobacco, vehicles, alcohol and cigarettes, our indirect taxes are not high. Their share in budget revenues is very high. It is said that they will try to bring a balance. I think it is necessary to increase the corporate tax,” he said.
“Combine VAT and SCT”
Imran Okumus, President of the Petroleum Products Employers’ Association (PÜİS), stated that the focus in Turkey is on the unregistered and illegal petroleum trade, and that there is an initiative to establish a vehicle recognition system for vehicles. But according to Okumus this will not solve the problem because there is no physical leakage in fuel after the current measures. Okumuş stated that the main problem in the sector is the circumvention of the system with fake and/or irregular invoices in order to reduce VAT and SCT accruals and said, “Combine VAT and SCT and this problem will be solved.”
“Although physical smuggling is over, tax evasion continues. With tax evasion, VAT does not go to the treasury, but to the pockets of tax evading ones. It is wrong to look for tax evasion at the stations, dealers cannot purchase from anywhere other than the distributor. Tax evasion occurs not at the station, but in foreign sales” Okumus states.
“LEGALLY COMPLICATED PROCESS, SPECIAL TRAINING IS NECESSARY”
Hakan A. Yavuz, a faculty member at Ankara Yıldırım Beyazıt University, reminded that many conflicting decisions started to be issued with the start of the courts of appeal and underlined that the legal problems of the field are complex. Stating that in the legal functioning of the informal, illegal and criminal economy, people and institutions working at all stages, from law enforcement officers to judges who make decisions, should be knowledgeable in this field, Yavuz said, “Smuggling crime is a technical field. The law is also very difficult. Therefore, since it is a technical crime, all persons and institutions that implement customs, law enforcement, prosecutors and judges must receive very serious training.”
“POLITICS MUST ALSO CONTRIBUTE”
Hacettepe University Faculty Member Prof. Dr. Muhittin Acar emphasized that the political approach is decisive in the fight against illegal trade and that only police or professional efforts is not enough and said, “The fight against illegal trade is more than a police or professional issue, it is a political issue; because it is not possible to fight illegal trade without solving who gets rich from where and who decides this. Who to tax is also a political choice.”
Acar stated that professionals, especially law enforcement officers, are determinedly fighting against illegal trade and emphasized that this determination should also be shown to the society and especially by the political administration. Pointing to the importance of inter-institutional coordination, Acar underlined the recent trend of expansion in the informal and illegal economy and stated that they also observed problems in the field of health.
19.5 million products were inspected
In his presentation at the conference, Nazım Kankilic, Group Head of Revenue Administration at the Ministry of Treasury and Finance, stated that since 2007, the banderoled product monitoring system (BÜİS) has ensured the monitoring and tax security of tobacco products and alcoholic beverages; more than 19.5 million products were inspected in 2022. Pointing to the impact of audit and collateral practices in fuel, Kankılıç announced that approximately TRY 1.4 billion special irregularity fines were imposed in 2022.
Illegal product seizures increased by 92%
Seda Gunduz, Head of Department of the General Directorate of Customs Enforcement, made a presentation at the conference and stated that they achieved a 92 percent increase in the capture of smuggled products with the strengthening of the technological infrastructure. She stated that in the last three years, illegal fuel seizures exceeded TRY 300 million , and in the first 11 months of 2023, more than 1 million electronic cigarettes, 515 tons of rolling tobacco and 330 million macarons were seized, and more than 57 thousand smuggled mobile phones were seized.