Turkish Treasury Eyes Corporate Tax Revamp to Bolster Public Purse

Turkey's Ministry of Treasury and Finance is contemplating a significant overhaul of the country's corporate tax structure, with the aim of generating an additional $7 billion in annual revenue. The proposed changes target both domestic and multinational corporations, aligning with a global push for a more standardized corporate tax system.

A central pillar of the proposed reforms is the introduction of a minimum 15% corporate tax rate for multinational corporations operating within Turkey. This move aligns with a global initiative spearheaded by the Group of Twenty (G20) major economies, aiming to tackle loopholes in international tax regulations that allow corporations to shift profits to low-tax jurisdictions. The Turkish government anticipates this minimum tax to generate an estimated 40 billion Turkish lira ($4. 4 billion) annually.

Furthermore, the Ministry proposes establishing a new minimum tax base applicable to domestic Turkish corporations. The specifics of this base are yet to be finalized, but the government expects it to yield an additional 90 billion lira ($9. 9 billion) per year. This change aims to streamline the corporate tax landscape and potentially broaden the tax net.

Real estate investment trusts (REITs) are also set to face increased scrutiny under the proposed tax reforms. The Ministry is considering mandating REITs to pay a minimum corporate tax on profits generated from property sales and rentals. This move is expected to bring in an additional 7. 2 billion lira ($790 million) annually, potentially impacting the profitability of the REIT sector.

The digital asset market, which has witnessed a surge in popularity among Turkish citizens seeking an inflation hedge, is not exempt from the proposed tax measures. The Ministry is exploring the possibility of imposing a 0. 03% transaction tax on cryptocurrency trading. This tax, estimated to generate 3. 7 billion lira ($400 million) per year, could dampen investor enthusiasm and potentially impact trading volumes.

The proposed tax reforms come amidst a backdrop of rising inflation and a weakened Turkish lira. The government hopes that the additional revenue generated by these changes will bolster the public purse and contribute to economic stability. However, the potential impact on corporate profitability and investor sentiment remains a concern, and the final details of the reforms are likely to be subject to further debate and negotiation.

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