'Tax injustice will increase': What does the new package bring and to whom?

The 36-item tax package, approved by the Planning and Budget Committee, is expected to be tabled in Parliament's General Assembly shortly. So, who will the new package affect, and how?

The government presented the proposal on the grounds of "strengthening tax justice" and "fighting informality." However, according to DW Turkish, an Impact Analysis prepared by the Ministry of Treasury and Finance and added to the bill indicates that the main effect of the regulation is to increase public revenues.

According to reports citing the Impact Analysis, which has not been released publicly, the total impact of the package will reach approximately 350 billion lira. More than 200 billion lira of this will come from additional revenue and 150 billion lira from savings.

Most of the regulations focus directly on broadening the tax base and increasing the premium burden on employment.

The Treasury aims to create new revenue sources to combat the deficit in the 2025 budget. Accordingly, a one-point increase in the employer premium rate will generate 111 billion lira in 2026, raising the upper limit of premium-based earnings to nine times the minimum wage will generate 63.7 billion lira, narrowing the rental exemption will generate 22 billion lira, and introducing notary fees will generate 13.1 billion lira in additional revenue.

On the other hand, the removal of the young entrepreneur incentive and the reduction of employer premium support are aimed at saving approximately 110 billion lira.

This table shows that the financial justification of the package outweighs the social dimension.

Economist Emre Şirin says that although the regulations are presented as "reforms," ​​they are technically revenue-raising regulations:

The public sector will continue to spend, and its need for resources will increase. Additional taxes, fees, and penalties will continue to be created to meet this need. The cycle of borrowing, interest burden, and re-borrowing will continue to be the biggest problem in 2026.

Tax exemptions for residential rental income will now only apply to those receiving pensions for retirees, widows, orphans, and disabled individuals. Other property owners will be required to declare their full annual rental income.

The ability to deduct interest expenses for those who buy a home with a long-term mortgage and rent it out is also being eliminated. This is explained as a way to narrow the tax gap between owning a home with a mortgage and owning one without. Criticism is that this move will create a burden that translates into a wealth tax, particularly for low- and middle-income households.

Şirin emphasizes that this change will also indirectly affect tenants:

"The tax burden appears to fall on landlords, but under market conditions, this cost will be reflected in the rent. The cost of the rent enforcement will fall on tenants, and a more difficult time will begin for them."

If a difference is detected between the sale price and the actual market value at the land registry, the tax loss penalty will now be applied as a multiple of 25%. This aims to deter under-declaration.

The notary fee exemption for second-hand vehicle sales is being abolished; a fee of at least 1,000 lira, equivalent to 2 per thousand, will be charged on the sales price.

The government aims to reduce informal trade with this regulation, but this step could narrow the market by increasing transaction costs.

Şirin evaluates these regulations as part of the indirect tax increases: “Fixed income earners will once again bear the brunt of inflation and fundraising problems.”

Another noteworthy item is the annual license and operating fees imposed on the health, real estate and precious metals sectors.

Numerous professions, from private healthcare facilities and dental clinics to veterinary clinics and jewelry businesses, will now be required to pay annual fees ranging from 10,000 lira to 7.5 million lira. This measure is being considered a strategy to broaden the revenue base without increasing tax rates.

The proposed law isn't limited to tax regulations. The employer premium rate would be raised from 11 percent to 12 percent, and the retirement premium rate would be raised by one percentage point.

Premium rates for part-time workers, agricultural workers, and domestic workers are also being increased from 20 percent to 21 percent. Treasury premium support for non-manufacturing sectors is being reduced from four percentage points to two percentage points, and premium support for young entrepreneurs is being eliminated entirely.

These steps aim to increase Social Security Institution revenue, but their effectiveness in combating informality is debatable. Furthermore, military service loan, voluntary insurance, and BAĞ-KUR revitalization premium rates are being raised to 45 percent. This will directly increase the insurance burden.

Şirin comments: "Tax will continue to fall on the shoulders of low-income earners, who are already being tested with hunger and poverty. Not only will fairness in taxation not increase, but injustice will continue to grow due to indirect taxes and income tax withholding."