Same tax rate is imposed for everyone without making any differentiation on the basis of income.

I have mentioned several times that the growth rate attained over the last five decades failed to close the prosperity gap between Turkey and developed countries. In fact, the gap remained the same let alone being narrowed down.

We have to alter the status quo.  It is hard to accomplish this in any country since there are sections of the society the interests of which are closely tied to the status quo. This tie leads to a resistance to reform. And even if you dare to break it, the steps you have to take to alter the status quo necessitate financial resources.

Turkey has a chance in this respect since the ratio of tax revenues to gross domestic product is quite low. For instance, the ratio as of 2007 was 23.7 percent while the EU average stands at 39 percent. These two figures alone prove that Turkey has a potential to generate resources. The first reason I am repeating these is a new publication by Boğaziçi University: 'Taxes, Representation and Democracy in Turkey' by Ünal Zenginobuz, Fikret Adaman, Fatoş Gökşen, Çağrı Savcı and Emre Tokgöz.

The research is based on two datasets. First dataset is the household budget surveys for the 2003-2008 period announced by TURKSTAT. Second dataset is composed of the evaluations on the results of a survey conducted with 2400 people country-wide in June-July 2009.

Low revenue is not the only tax-related problem for Turkey; another problem is that a substantial part of the tax revenues come from consumption tax. Of course this is not a just system since the same rate is imposed for everyone without making any differentiation on the basis of income.  Turkey is different than the EU countries also in this respect. Another point of distinction is the high tax burden on employment.  There is a huge gap between the gross wage and the net wage a worker receives after insurance premium and income tax deductions. For a single-child household with one member employed the said ratio for Turkey and EU stands at 38.5 and 32 percent, respectively.

The first part of the research which relies on TURKSTAT data puts forth this unjust system more apparently. If households are classified under five income groups and the ratio of consumption tax to income is examined for each, the skewness becomes even clearer.

For the poorest group the ratio of the sum of indirect taxes such as SCT (special consumption tax) and VAT (value added tax) to income is above the Turkey average and as well as the average appearing for the richest group. To put it differently, the poorest group shoulders almost two times of the tax burden of the richest group. More interestingly, tax burden increases as income level decreases.

However if taxes was imposed directly on income, this skewed system can be overcome. Authors indicate that should income tax could be collected completely, the current progressive income tax system could correct the income distribution to a large extent.

The survey conducted with 2400 participants also reveals interesting results. For instance, given the existing quality of the public services, citizens are willing to spend 10.7 percent of their income for taxes. If an advance in quality is promised, the ratio increases up to 16 percent.

This commentary was published in Radikal daily on 25.10.2010