Şimşek: World should fight against tax evasion like it fights against terror


Mehmet Şimsek, speaking at an international G20 tax event in Istanbul on Thursday, said that the global economy needs a healthier system for taxation transparency

"Fighting tax evasion is like fighting international terror," Turkey's Finance Minister Mehmet Şimşek said yesterday at a G20 tax event in Istanbul.

The event has brought 300 high-profile delegates from 60 countries together to discuss current tax rules and ideas on how to fight international tax evasion.

Saying that the world is getting smaller by the day, Şimşek said, "Today the world is a global village. Ten years ago, there were only 5,000 multinational companies doing business in Turkey, but today that figure has reached 42,000."

Şimşek also claimed that taxation "is a vital issue, particularly for developing and undeveloped countries. Those countries lose valuable money due to tax evasion. Indeed, the lost income could be used for health, education or research and development projects."

Şimşek said that the Organization for Economic Co-operation and Development (OECD) and the G20 are working together effectively and productively and pointed out that the action plans made up of 15 Articles signed by the leaders was signed in September 2013, which means common starts are to be applied for international tax practices, tax regulations and steps related with tax. The action plan focuses on protecting the tax base and taxable profit, which requires predictability of tax payers, as any firms active online are not included in the current regulations. Şimşek underlined that while these companies make money and are active all around the world, they claim that because they are online companies, they are not obliged to pay taxes. "According to OECD's rules, we have to consider this. Because if a profit is being gained, if an economic activity is taking place, this should be considered and taxed," added Şimşek.

According to a 2011 World Bank report, governments around the globe lost more than $3.1 trillion in annual revenue due to tax evasion. The size of the shadow economy has also been a challenge for the Turkish government. However, Turkey is still in fourth place in terms of the size of its shadow economy among developed countries who are members of the OECD.

The World Bank says the informal economy in Turkey is not much larger in size than the average of the EU nations, where it is 18.6 percent of GDP. In Greece, the shadow economy is 24 percent of GDP; in Germany it is 13 percent.

Praising the OECD's Base Erosion and Profit Shifting (BEPS) Project, which aims to tackle aggressive practices that erode the tax base of companies and artificially shift profits to low or no-tax jurisdictions, Şimşek said, "Turkey gives full support to the G20/OECD BEPS project. This 15-point action plan will improve tax transparency as well as eliminating strict banking secrecy."
BEPS was adopted at the July 2013 Ministerial Council Meeting at the request of G20 finance ministers.

The project is designed to close the loopholes that can be exploited by companies to avoid taxation in their home countries by pushing activities abroad to low- or no-tax jurisdictions, while undermining the fairness and integrity of tax systems.

Masatsugu Asakawa, chair of the OECD's Committee on Fiscal Affairs said that the OECD, IMF, World Bank and U.N. have been cooperating on tax transparency. "Taxation is really a significant issue. [...] We are working to provide a common method to fight against tax evasion," he said.

On the matter of investment, Şimşek said he estimates that the global infrastructure investment requirement will be minimum $70 trillion until 2030, and while the interest rates are low, there are no adequate amount of investments, even though there are plenty of funds. "These funds need to be diverted to infrastructure investments, which are necessities for ensuring development,
growth and productivity," said Şimşek. While noting that the G20 may take steps regarding this matter, Turkey also needs to make a leap in order to improve the investment environment. He also indicated that the World Bank and other international finance organizations need to establish required frameworks and improve the conditions for public-private sector investments. "While there is plenty of capital in the world, the employment rates are so poor as to be contradictory. Investments are one of the major issues we will try to deal with during our presidency of the G20," added Şimşek.

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