Today every nation, every organized political community, every country in the world is considered as an economic unit which is called as the national economy. In the national economy the production of various kinds of goods and services are realized in
different sectors.

National economy consists of two main sectors: the public sector and the private sector.

Public sector in the national economy includes mainly the economical activities of the government and the other public authorities.

Fiscal law is considered as a branch of public law while it governs the relationship between the individuals and the government regarding public finance and regulates the operations of the government in the field of public finance.

Fiscal law consists of two branches: public revenue law and public expenditure law.

Public expenditure can be defined as the spending made by the government of a country on collective needs and wants.

All the administrative units must make public expenditures within the budget appropriations allocated to them, in other words, their expenditures should not exceed the amounts released. Also, such expenditure should conform with the provisions of the legislation on public expenditure.

The law clearly articulates the accountability of ministers and other high-level civil servants. It extends the scope of the budget; provides budgetary unity, increase effectiveness, fiscal transparency, and accountability during the process of preparation and implementations of budgets; ensures transparency in financial management; and restores the balance between authorizations and responsibilities in the spending process by establishing an efficient accountability mechanism.

The PFMC Law has also introduced a modern internal audit framework. The law envisions a decentralized internal audit model in which internal auditors report to the head of the administration. To provide a centralized oversight mechanism over the dispersed internal audit function, the law requires a central Internal Audit Coordination Board (IACB) to be attached to the Ministry of Finance. This board would set internal audit standards, organize training for internal auditors, and provide quality assurance for internal audit work carried out by the line ministry internal audit units.

Governments need to perform different functions in the field of political, social and economic activities to maximise social and economic welfare. In order to perfom such duties and functions, the government requires large amount of resources. These resources are called as the public revenues. Public revenue is defined as the total income of the government and the other public authorities from all sources. It is an important tool of the fiscal policy of the government and is the opposite factor of government spending.

Taxes are the first and foremost sources of public revenue. In the second place of the public revenue comes the public borrowing.

Whether the public revenue is raised from taxes or borrowing it should comply with the provisions of the public revenue law.

In article 217 on the duties of the Ministry of Treasury and Finance it is clearly stated that to carry out treasury operations; to find the cash that is required for the expenditures of the State; to carry out the domestic borrowing operations of the State; to issue government bonds, treasury bills and other domestic borrowing instruments; to sell is the authority and duty of the Ministry of Treasury and Finance.

By the method of competitive bidding, the method of regular sale and other methods; to determine the quantities of such government bonds, treasury bills and other domestic borrowing instruments to be sold and their values and interest rates; to carry out the preparation, the contract, the issue, the payment, the early payment and the registration procedures of all types of domestic and foreign borrowing in connection with the management of State debts; to carry out the procedures related to interest and lending that are assigned by the State; to establish and operate a State Debts Accounting Office for this purpose; to keep an account of debt management; to create a database for Turkey’s foreign debts; to keep a foreign debts file for this purpose; to carry out the procedures related to the provision of treasury guarantee under various laws and other legislation; to keep the necessary records; to determine the terms and conditions of guarantee and are authorities and duties of the Ministry of Treasury and Finance. 

It is an inherent power of the sovereign, exercised through the legislature, to impose burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of government. It is also defined as the act of levying a tax, i.e. the process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of government. It is a method of apportioning the cost of government among those who, in some measure, are privileged to enjoy its benefits and must therefore bear its burdens. The primary purpose of taxation (the revenue or fiscal purpose of taxation) on the part of the government is to provide funds or property with which to promote the general welfare and the protection of its citizens and to enable it to finance its multifarious activities. Taxation may also be employed for purposes of regulation or control (the non-revenue or regulatory purpose of taxation). Taxation is often employed as a devise for regulation by means of which certain effects or conditions envisioned by the government may be achieved.

Tax law is concerned only with legal aspects of taxation, not with the its financial, economic or other aspects.

Tax law falls in the domain of public law i.e., the rules that determine and limit the activities and reciprocal interests of the political community and the members composing it as distinguished from relationships between individuals (the sphere of private law).

Tax law can be divided as general tax law and special tax law (national taxation system), also as material tax law and formal tax law, international tax law, tax procedural law, criminal tax law, etc.

Tax system is defined as the legal system for assessing and collecting taxes. It is a system created to administer, collect, integrate, improve, change and manage methodically the local tax law and national tax legislation. It should be a fair, transparent, accurate and effective system vital for the government to administer, collect, change and manage taxes within the country. Tax systems can either be a single tax system or a multi tax system.

-The constitutional principle of legality of taxation requires that any tax with all of its essential elements must have a firm basis in law. That clearly means no tax can be levied except under authority of a law. As fundamental rights and personal freedom cannot be restricted except by law and as any act of the administration, including any administrative act of tax assessment and collection requires a firm basis in law.

-The taxpayer is the real person or the legal entity liable for the debt in accordance with tax laws.

-The person responsible for the tax is the person who is responsible towards the taxation office, as regards the payment of the tax.

-Legal capacity shall not be required for being a taxpayer or responsible for the payment of the tax.

-Taxable event is any event or transaction that results in a tax consequence for the party who executes the event. Taxable events generally result in the tax liability of the relevant person. 

-Tax object is defined as the things with an economic value indicating the ability to pay of the to pay such as income, property and expenditure. In this context, the income of an individual, tangible-intangible or movable-immovable properties, consumptions and transactions on which the gorverment has imposed the taxes can be the object of taxation.

-Tax base is defined as the measure upon which the assessment or determination of tax liability is based. The tax is charged on tax base. 

-Tax rate is defined as the proportion of income, spending or asset value that is taxed. It is generally expressed as a percentage of the value of income or property to be paid as a tax.

-Tax exemption or exemption from taxation is defined as the situation of not being subject or liable to taxation.

Taxes, duties and charges, and the ones that belong to provincial private administrations and municipalities are within the scope of the TP Code No. 213. However, taxes, duties and charges collected by customs administrations are not subject to the TP Code.

Taxes on income are the taxes imposed on individuals or entities that vary with their respective income or profits.

Turkish taxation system consists of two main taxes on income: personal income tax and corporations tax (corporate income tax).

An individual is subject to the personal income tax on his income and earnings, in contrast to a corporation which is subject to corporate income tax on its income and earnings.

Any individual having an income from one or more of the below;

1. Business profits: The profit arising from commercial or industrial activities.

2. Agricultural profits: The income derived from agricultural activities.

3. Salaries and wages: The income derived from dependent personal services

4. Income from independent professional services: The income derived from any  activity performed by a person who is selfemployed, and based on professional and scientific expertise rather than capital.

5. Income from immovable property and rights: The income derived especially from the rental of real property, which includes land buildings, and permanent leasehold
rights as well as letting of some goods

6. Income from capital investment: The interest or dividend income and other profits derived from capital in cash or capital in kind.

7. Other income and earnings without considering the source of income: capital gains and non-recurring income.

The event that creates tax liability in personal income tax is to receive income. For business profits and agricultural profits, income is prescribed in PIT Law on accrual basis and for the other five terms of income on a cash basis.

Nationality does not, in principle, make any difference for income tax liability. Hence foreigners as well as Turkish national shall be subjected to income tax when they receive income.

An individual whose domicile is in Turkey is liable to pay tax for his worldwide income (unlimited liability). Any person who resides in Turkey more than six months in one
calendar year is assumed as a resident of Turkey. (However, foreigners who stay in Turkey for six months or more by the reason of a specific job or business or particular purposes are not treated as resident.)

Tax base: As a rule, the PIT Law charges the net amount of income on its aggregate, which is determined on the actual basis. In order to determine net amount of income on the actual basis, some expenses and expenditures stated in PIT Law may be deducted from the relevant gross income.

Tax Rate: In line with the rule of taxing annual income as an aggregate, the PIT Law adheres to progressive taxation. Today the progressive tax is set as 15% for the first bracket and %35 for the top bracket.

There are several tax exemptions provided in the PIT Law such as the tax exemption for artisans (small traders and craftsmen) and a partial exemption for rents obtained from house lettings.

Unlike personal income tax, it is considered as a non personal tax as a single tax rate of 20% is applied to all corporations - regardless of their corporate income. Therefore, corporations tax is not in conformity with ability to pay principle.

The corporation tax is levied on the income (profits) of corporations. According to article 1 of CT Law, the profit of a corporation consists of all the income items (business profits, agricultural profits, salaries and wages, income from independent professional services, income from immovable property and rights, income from capital investment and other income and earnings) within the scope of PIT Law.

Earning of the corporate profits is the taxable event in the corporations tax. In other words, there is also a similarity between personal income tax and corporations tax with respect to tax the event creating the tax liability. The corporate profits are treated just like the business profits in personal income tax, and the earning of the corporate income on an accrual basis generates the tax debt of the corporations.

According to article 1 of CT Law, the profits of capital companies (joint stock companies, partnerships with limited liability and limited partnerships in which the capital is divided in to shares), cooperatives, state economic enterprises, the business entities owned by societies and foundations, and corporate joint ventures are subject to corporations tax.

Non resident corporations with neither their legal center nor central management in Turkey are prescribed as corporate tax payers with limited liability.

The tax base of the corporations tax is the net profits of the corporate bodies earned in one year.

Unlike personal income tax, the corporations tax is paid at one standard rate of %20.

The profits earned from participation in other corporations and the tax exemption for the profits obtained abroad by companies from construction projects
and technical services.

Tax object: The buildings and lands in Turkey and within the municipality frontiers are subject to real estate tax.

Tax payer: The taxpayer is the owner of the building or land, the owner of any usufruct over the building or land, or if neither of these exists, any person that uses the building or land is considered as its owner.

Tax base for the real estate tax is the tax value of the building or land according to the Real Estate Tax (RET) Law No. 1319.

Real estate taxes are calculated annually by
related municipality based on the tax values of land or buildings at rates varying from 0,1% to 0,3%. These rates are increased by 100% within the frontiers of metropolitan municipality. 

In articles 4, 5 and 6 of the Real Estate Tax (RET) Law No. 1319, some permanent or temporary exemptions are stated such as the real estate tax exemption for propety owned by the state or other local authorities.

Real estate tax liability begins following the budget year in the case of acquiring real estate, change in situation of real estate property or end of exemption.

Land motor vehicles registered to traffic bureaus or offices, also helicopters and airplanes registered to the Directorate General of Civil Aviation are subject to the motor vehicle tax. Motor vehicles are classified into three categories in terms of motor vehicle tax:
List 1: cars, motorcycles and terrain vehicles etc.
List 2: minibuses, panel vans, motorized caravans, busses, trucks etc.
List 3: aeroplanes and helicopters

Motor vehicle tax liability begins with acquisition and entry in the relevant register of a motor vehicle in his own name.

Taxpayers are real and legal persons who have motor vehicles that are registered to their own names in the traffic register and the civilian air-vehicle register maintained by the Ministry of Transportation, Maritime Affairs and Communications.

The fixed amount of motor vehicle tax for land transportation vehicles is determined according to their age, type, number of seats, cylinder capacity, maximum gross weight (after 01.01.2018 also purchase the value of the cars, minibuses and panel vans and terrain vehicles). The amount for planes and helicopters is determined according to their maximum takeoff weight.

The exemption for the motor vehicles of diplomatic missions granted under the principle of reciprocity are applied relating to motor vehicle tax.

All the items comprising the property acquired as a gift or through inheritance are subject to inheritance and gift tax.

Turkish citizens are subject to inheritance and gift tax on worldwide assets received. Resident foreigners are subject to inheritance and gift tax on worldwide assets received from Turkish citizens and on assets located in Turkey received from resident foreigners or nonresidents. Nonresident foreigners are subject to inheritance and gift tax on assets located only in Turkey.

Acquired item’s appraised value is the tax base for the inheritance and gift tax. Tax paid in a foreign country on inherited property is deducted from the taxable value of the asset.

The value of the assets received is subject to progressive tax rates ranging from 10% to 30% and 1% to 10% respectively.

Various tax exemptions are foreseen in articles 3 and 4 of the Inheritance and Gift Tax (IGT) Law No. 7338 such as the tax exempt of the public administrations, political parties or the exemption for the inherited household items, personal belongings of the decedent or the items conserved as family souvenirs like swords, paintings, decoration and medals, etc.

Taxes on expenditure are the taxes levied on the total consumption expenditure of an individual. Turkish taxation system comprises several indirect taxes, such as value added tax, special consumption tax, stamp tax, banking and insurance transactions tax, special communication tax, fees, etc.

Turkish taxation system levies value added tax on the supply and the importation of almost every goods and services at each stage of the production and the distribution process.

People or entities who supply goods or services within the scope ot their commercial, industrial, agricultural or independent professional activities within Turkey or people or entities who import goods and services as VAT taxpayers are liable to VAT in their taxable transactions, irrespective of their legal status or nature and their position with regard to other taxes. However, liability for the tax levies on the person who supplies or imports goods or services, the real VAT burden is on the final consumer.

The Turkish VAT system employs multiple rates such as 1%, 8%, 18% (the standard rate of VAT on taxable transactions) for different goods and services and the President of the Republic is authorized to change the statutory VAT rate (10%) within certain limits (from 0% to 40%).

Various exemptions for VAT are foreseen in articles 15, 16 and 17 of the Value Added Tax (VAT) Law No. 3065. In this context, the exportation of goods and services is one of those transactions which are exempt from VAT. There is also a diplomatic exemption for VAT.

There are mainly four product groups that are subject to SCT at different tax amounts or rates.
• List (I) is related to petroleum products, natural gas, lubricating oil, solvents and derivatives of solvents,

• List (II) is related to land, air and sea vehicles (cars and other vehicles, motorcycles, planes, helicopters, yachts etc.),

• List (III) is related to alcoholic beverages and cola soda pops, cigarettes and other tobacco products,

• List (IV) is related to other consumption goods (caviar, furs, mobile phones, white
goods and other electrical household machines etc.).

Taxpayers of SCT vary by list and transaction as follows:
• For List (I), manufacturers including refineries or importers of the petroleum products,
• For List (II), traders of motor vehicles, importers for their use (not for selling) or sellers of untaxed vehicles through auction,
• For List III, manufacturers and importers of the goods or sellers of untaxed goods through auction,
• For List IV, manufacturers and importers of the goods or sellers of untaxed goods through auction.

Tax base for SCT differs according to the lists. For example, the tax base for cigarettes and other tobacco products is retail selling price of these goods to final customers including VAT. Tax base for importation of cigarettes and tobacco products shall also be the retail selling price of these goods. However, the tax base for the goods of List (IV) is VAT tax base excluding SCT.

The Turkish VAT system employs multiple rates such as 1%, 8%, 18% (the standard rate of VAT on taxable transactions) for different goods and services and the President of the Republic is authorized to change the statutory VAT rate (10%) within certain limits (from 0% to 40%).

Various exemptions for SCT are foreseen as per the relevant lists in SCT Law No. 4760. Exportation for the goods within lists (I), (II), (III) and (IV) and and diplomatic exemptions granted for the goods within lists (I), (II), (III) under the principle of reciprocity can be stated in this context.

Tax Object: Stamp tax applies to a wide range of documents listed in Annex I of Stamp Tax Law No. 488. Stamp tax levied documents, which are functional to document and prove one’s claims, are including but not limited to, contracts, agreements, notes payable, letters of credit and letters of guarantee, financial statements and payrolls.

Taxable Event: Stamp tax arises with the signing of the taxable documents.

Tax Payer:The parties who sign a document on which stamp duty is imposed are liable to pay stamp tax. The Law No. 488 provides that each relevant party shall be responsible for payment of the total amount of stamp tax on the documents.

Tax Base & Tax Rate-Amount: Stamp tax is levied according to the type of documents at different tax rates or lumpsum amount listed in Annex I of the Stamp Tax Law.

Tax Exemption: Documents exempt from stamp tax are listed in Annex II of the Law No. 488.

Tax Object & Exemption: All the transactions and services stated in the Law No. 6802 and performed by banks, bankers and insurance companies are subject to banking and insurance transactions tax (BITT) regardless of the nature of the transaction. The transactions of banks and insurance companies are exempt from VAT, but are subject to BITT, which is due on the gains of such companies from their transactions. 

Taxpayer: Taxpayers of banking and insurance transactions tax are banks, bankers and insurance companies.

Taxable Event: There will be the banking and insurance transactions tax upon the money, which they collect under the name of interest, commission and expenditure because of the services they performed on behalf of banks, bankers and insurance companies.

Tax Base & Rate: The tax base for BITT is the total amount of Money collected by the banks and insurance companies from their customers. The general BITT rate is 5% and some specific transactions are taxed at 1%. In addition, foreign exchange transactions are subject to 0 (zero) BITT according to the Council of Ministers Decision since 2008.

Tax Object: Certain telecommunication services are subject
to special communication tax.

Taxable Event: Special communication tax is imposed on the performance of certain communication services such as mobile electronic communication services, the services regarding the transmission of radio and television broadcasts on satellite platforms and cable medium, the internet providing services by wired, wireless and mobile and other electronic communication services.

Tax Payer: Tax payers of the special communication tax are the operators who provide the electronic communication services.

Tax Base: The tax base for special communication tax is the same as the VAT base. Unlike special comsumpiton tax, this tax is not included in the VAT base.

Tax Rate: Special communication tax rates are as follows: 25% mobile electronic communication services (including the sales for pre-paid lines), 15% for the services regarding the transmission of radio and television broadcasts on satellite platforms and cable medium, 5% for the internet providing services by wired, wireless and mobile, 15% for the electronic communication services not listed above.

Fees regulated under the Law No. 492 are also considered as a special duty related to legal transactions in Turkish Tax System.

The fees which are collected by the central government are in different types such as Judgment Fees, Notary Fees, Tax Judgment Fees, Title Deed Fees, Consulate Fees, Ship and Harbor Fees, Permit of License and Certificate Fees, Traffic Fees, Passport, Visa and Ministry of Foreign Affairs Certification Fees.

The above mentioned fees are taken at different rates or in fixed amounts from the ones who benefit from the services which are liable to the relavant fees.