Turkish Finance Ministry to tightly monitor e-commerce tax evasion

Published 23.06.2017 22:16

In a bid to prevent tax evasion in e-commerce and targeting e-commerce websites that do business abroad while making profits in Turkey, the Finance Ministry has plans to launch a tax monitoring system.

Finance Minister Naci Ağbal has said that the ministry plans to fight the unfair tax competition that exists in e-commerce, asserting that officials will conduct these efforts under the auspices of two channels, known as the tax cut and ex officio tax liability.

Speaking to Anadolu Agency (AA) regarding the tax applications slated for non-taxpayer, e-commerce companies in Turkey, Ağbal said that taxation of e-commerce has become an increasingly important issue worldwide, stressing that this type of commerce has no boundaries when it comes to tax laws.

Pointing out that e-commerce is a major money-making concept in countries worldwide, Ağbal said that the countries already earning money from e-commerce do not voice concerns for tax-related issues, citing that they are already receiving tax payments from e-commerce companies based on the fact that they earn money in that country. However, the countries in which the money is being made face unfair tax competition.

Ağbal said that even though commercial sales are being conducted online, the activity is being made in the country in which the money is being earned. About the proposed tax cut, Ağbal said: "We are not talking about a tax cut on the transactions made by the customer who is searching for hotels during the execution of e-commerce. We're talking about cutting taxes from the hotel's payment. If a tax-paying enterprise transfers money to an e-commerce company that makes money from Turkey but does not pay its taxes, we will make the cut from the transferred amount.

"The technical work continues. From this point of view, there will not be a dimension that concerns the customer and the citizen. We will ask major banks to deduct the commission fees that the hotel will then transfer to the e-commerce company."

Indicating that technical developments in regard to the tax break are still ongoing, Ağbal said they plan to determine this depending on sector-specific requirements and service needs, rather than bringing this application to all e-commerce enterprises will the project is still in the early stages.

Reiterating that this is not the first time the ministry has issued such a cut, Ağbal said that many similar tax cuts have already been made in areas across Turkey and, today, tax cuts are also offered on the intangible rights paid by the enterprises to firms abroad.

He went on to suggest that whoever is held fiscally responsible for the tax burden will also be required to conduct business in full compliance with the market mechanism. "In this case, it is safe to say that the foreign company will increase the commission fee of the hotel and, somehow, the hotel will be held responsible for the subsequent tax burden," he said. "However, it isn't that easy. In short, it all depends on the pricing behaviors within the market mechanism. Then, maybe the hotelier will say that ‘commission costs have risen so I am not doing business with you.' "

Ağbal also said that with implementation of this practice, the Ministry aims to force foreign non-taxpaying e-commerce companies in Turkey to become taxpayers.

Moreover, he said the ministry will make determinations regarding the said e-commerce companies, adding that it will ask that ex officio taxes be paid on profits obtained in Turkey. "The Finance Ministry can freeze the activities of taxpayers in Turkey, take a look at their activities and make them ex officio taxpayers. As a matter of fact, we have [already] declared a company an ex officio taxpayer in Turkey, have written reports about this and have submitted these reports as requests for tax payments," he said.

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