Finance Minister Mehmet Şimşek announced on Wednesday seven fundamental changes to the income tax draft law, with which the government aims to come closer to the European average on tax collection in the country.

Speaking at a press meeting in Ankara, Şimşek stated that the average rate of income tax collected as a percentage of gross domestic product (GDP) stands at 11.4 percent in Organization for Economic Co-operation and Development (OECD) countries, 10.4 percent in Europe but only 5.8 percent in Turkey. He expressed that with this rate, Turkey is among the lowest ranking countries and said that tax collection rate is far below the country's economic potential. Şimşek underlined that the draft law will strengthen the fight against the informal economy, generate more money for the economy and prevent increases in income tax.

Providing further information, Şimşek said that the draft law is prepared in a simple and understandable manner while seeking, at the same time, a fairer income tax system and supporting investments, production and employment. “The other principles followed in preparing the draft law include increasing the competitiveness of the economy, bringing taxpayers into system more voluntarily, speeding companies' entry into formal economies and spreading the number of taxpayers among the core of the public.”

If the draft law passes in Parliament, the current income tax law, which has been in use for 53 years, will be updated. Şimşek highlighted that the draft law was prepared with the contributions of the public and private sectors as well as non-governmental organizations, academics and experts.

The updates to the law will also benefit young entrepreneurs and farmers. According to Şimşek, young businessmen below the age of 29 who are earning minimum wages will be exempted from paying taxes for three yeas. In the meantime, farmers who pay taxes on their agricultural equipment such as combine harvesters, trucks and tractors will not be taxed anymore, as do the producers of certified seeds and plants for the agricultural sector. Thus, those who also support the sector and are earning minimum wage will also be exempted from paying income taxes.

In addition, the deadline to file income taxes has been moved a month ahead but if the draft law passes, calculations will be made according to the previous system given that it will take time for the new system to be implemented.

Cihan