GLOBAL TAX REVOLUTION
The reason why taxes are the most important factor of the trust both in the tax system and improvement in accountableness of taxpayers is that impartial structure of the taxes is the greatest sort of income for the government.
Nowadays it is a well-known fact that multinational companies because of their dynamic natures are seeking to make use of international tax legislation with a more static structure so that they can have the opportunity to pay less taxes. These major taxes that multinational companies avoid damage their countries’ budgets significantly as well as the budgets of the other countries in which multinational companies are in activity. Therefore, these damages are compensated by the minor tax-payers inevitably.
BEPS (Base Erosion and Profit Shifting) has been the greatest tax revolution prepared by OECD for the last 50 years and it has been politically supported by G20 countries, which has raised the significance of this project whose purpose is to prevent the harmful tax rivalry and abuse of double non-taxation of multinational companies caused by the different tax policies implemented by governments.
“Base Erosion and Profit Shifting” studies initiated in 2013 points out that it causes an impact of between 100-240 billion US Dollars in loss of corporate tax revenues per year according to the OECD report published in November 2015.It was recognized by a major study like this which was completed in less than 2 years and made it ready to be conducted in 2015 that this project had a considerable amount of support.
From my aspect of thinking, it might take too much time to examine the whole action plan which consists of 15 articles one by one, besides it might be an unreliable examination to do so. Moreover, the actions of the BEPS can only be considered as recommendations instead of obligations.
Minimum standards that were agreed in particular to tackle issues in cases in which no action would cause negative effect on other countries are the ones that every country who participates in this project has commit to fulfill. 4 robust actions that are mentioned as minimum standards are both international and general agreement providing actions instead of local-country legislation as specified in OECD report issued in October 2015. As an example, it is most likely that 15thaction plan “Developing Multilateral Instrument” will include some regulations to reduce the number of cases of double taxation. That way there will be a mutual agreement provided and all countries who sign it will be responsible. It is planned to determine the activity status of countries’ actions with the help of OECD observations that will be made in 2020.Other actions committed to be done by the participating countries can be listed as: “Re-examine transfer pricing documentation” and “Counter harmful tax practices more effectively”.
There have not yet been any changes in the Turkish tax laws specifically associated with BEPS. Also the medium term development plan of Turkey does not contain any regulation under the BEPS Action Plan. However, Turkey supports the BEPS initiative. Representatives from the Turkish tax authorities actively take part in BEPS meetings and work on the actions, but have not made any public announcements specific to BEPS yet. In addition to all these, the new draft form of Turkish Tax Procedures Code including revised definition of “permanent establishment” covering digital work places, revised provision about the burden of proof as well as the new Articles about collection of information and Mutual Agreement Procedures is still under discussion.
Essential point is that these recommended action plans should be applied according to their content and timing in terms of priority of each country and their economic profile. To illustrate, “The Transfer of Intangible Assets” will not be one of the prior actions for Turkey because there is an inadequate productivity in “The Transfer of Intangible Assets”, the tax results because of this will be less remarkable compared to others. But if U.S which is one of the most productive countries with regard to intangible assets has been taken as an example, critical regulations effectuated in 2007-08 can be seen. Likewise, Germany has strict provisions as to “The Transfer of Risk and Capital” which is the Action 9 itself.
Provided that we analyze Turkey in the same way as we do for U.S and Germany, “Transfer Pricing” and “Digital Economy” attract the attention as Turkey is likely to take an action for these two issues.
It would not be a wrong determination to think that Turkish transfer pricing can be adjusted in accordance with the alteration of the OECD provisions which will most probably change in pursuance of the actions of BEPS. However on 27 January in 2016 –as part of the action 13- 31 countries compromised on an agreement called “Multilateral Competent Authority Agreement” except Turkey. Although there is still no information about why Turkey was not included in this agreement, the officials from the Turkish tax authorities indicated that they had the intention to act in the pursuit of the recommendations and it was announced by Revenue Administration in Ankara that there were two multilateral agreement regarding transfer pricing that Turkey was working on. It is not hard to understand how “Automatic Exchange” is important for those countries who have been dealing with the grey economy like Turkey to regain these assets.
Another point that was mentioned above and should be taken for granted is that there are a few rational reasons why I mention “Digital Economy” as an issue that would be an action to be taken. Foremost among them, it is Turkey’s skyrocketing in use of internet and computer. The lack of provision of taxation in “Digital Economy” subject in such a time when digital economy is having an increase in both supply and demand shows that “Digital Economy” action of BEPS will certainly draw an attention. On the top of that there are several concrete progresses supporting my perspective. A new draft of annunciation regarding electronic commercial activity was issued. Additionally, the new draft form of Turkish Tax Procedures Code involving 129th and 130th articles state some provisions regarding the definition and obligations of workplaces created in electronic environment. It can be foreseen that these two situations which include Twitter's dilemma of opening a bureau or not and Spotify being a tax payer which is at the moment not obliged to pay taxes in Turkey can be considered as next stages. However, it is a must to regulate and restrict the open-ended statements in the articles to avoid the possible troubles in future.
The BEPS project, in favor of our country, has a target for foreign companies that have investment in Turkey and Turkish companies that have investment abroad. The purpose of this project is to strengthen the economy as well as to increase the trust to the current system by making the tax system which is a fundamental for economy more transparent and more coherent.
Last but not least, it will be more appropriate to have opinions of all companies and the whole business world that are involved in economy while they are making changes in sophisticated subjects upon which there has not been a common agreement yet.
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