JEDDAH: Turkey is facing increasing pressure over its tax status after the EU granted an extension to demands that Ankara meet its tax transparency guidelines.
If Ankara fails to harmonize its tax policy in line with EU requirements, it could be placed on a tax haven blacklist if member states reach a consensus.
Brussels has criticized Turkey for failing to meet international standards on the automatic exchange of tax information, including tax transparency and prevention of tax evasion.
Turkey, which was already granted until the end of December 2020 to fix the issue, is on the EU’s gray list of offenders that includes other countries required to reform their tax policies.
However, some EU countries, including Austria, France and Greece, refused to give more time to Turkey. But Germany granted the extension, citing reasons of “political expediency.”
The EU tax haven blacklist, which was drafted in 2017, will be updated in October this year.
The bloc is trying to improve international tax governance by tackling tax evasion through illegal non-payment or underpayment of taxes. It is also tackling tax avoidance through the use of legal means to minimize tax liability, and money laundering in third countries.
EU efforts involve listing non-EU countries that encourage abusive tax practices in order to push them toward reforming legislation. Once they enact reforms, they can be removed from the list.
The Turkish opposition has also questioned the government over irregularities in its tax reforms.
The government granted the “gang of five” construction companies — Cengiz, Kalyon, Limak, Kolin and Makyol — tax incentives and exemptions 128 times over the last decade.
However, concessions given to companies with close ties to Turkish President Recep Tayyip Erdogan’s Justice and Development Party have stirred debate among the public, with many saying that it represents a double standard as the majority of citizens must pay a disproportionate amount of tax.
“Tenders are being handled without any supervision. Irregularities and corruption go unpunished. This is why they don’t care about the law anymore. The system is corrupted,” Murat Agirel, a dissident journalist who was recently jailed for his work, told Turkish media.
However, following legislation alone will not prove sufficient for Turkey to align with EU tax regulations. Turkish “front” companies, designed to take part in government contract bids and ensure that a specific company is guaranteed to win a tender, recently made headlines in the country.