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Government to implement urban rent tax in 2010
According to information from anonymous sources at the Finance Ministry, studies on the preparation of a new income tax law have focused on the taxation of urban rents, which aims to connect the Treasury's coffers to the increases in the values of real estate in areas surrounding public investments. This will be similar to a local improvement tax and will incur new taxes on real estate assets whose value appreciates due to the construction of a school, hospital or a park in the vicinity.
The new law, according to sources who spoke anonymously with the Anatolia news agency, envisages a 10-year period of transition to adopt the new system. In the first year, those who sell real estate within a year after purchase at an increased price due to public investment nearby will pay an urban rental tax of 10 percent of their public improvement revenues. This rate will increase by 10 percentage points with each succeeding year, and at the end of the transitional period, 100 percent of the revenues will be subject to taxation.
The Revenues Administration (GİB) plans to extend this period of transition to 15 or even 20 years and will offer their opinion for Finance Minister Şimşek's approval.
The Tax Council, GİB and the General Directorate of Tax Policy have been spending hours together devising a draft of the new income tax law. They will present a briefing to Şimşek shortly on the basic details of the law, most likely putting alternatives on the table for the new tax rates, the taxation of urban rents and agricultural revenues, the tax burden of small business owners and tax security issues. After getting final approval from the minister, the bureaucrats will send the draft to the Prime Ministry, which will organize the passage of the draft on Parliament's agenda after getting the signatures of other Cabinet members.
Finance Ministry officials, Anatolia claims, believe that these procedures will finish soon and that the new law will come into effect by the new year.
The new law envisages radical amendments to the current law. To name a few of these changes, the inheritance tax will be lifted; the gratuitous transfer of property will be incorporated in income tax; an urban rent tax will be introduced; small business owners will be exempted from certain taxes; and street vendors and craftsmen such as locksmiths, tinsmiths, house painters, bootblacks, barbers and woodsmen who work without opening a shop will also have certain income tax exemptions on their earnings. Similarly, those who make handicrafts, souvenirs, lacework, knit articles and so on to sell as a retailer will not be subject to income tax for the revenues from the sale of these items.
The draft also seeks to decrease income tax rates, which are currently in four brackets of 15 percent, 20 percent, 27 percent and 35 percent, to three brackets of 10, 20 and 25 percent.
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