English translation
The expected changes in the tax legislation in 2009 for the purpose of harmonization with the EU Legislation
1. Introduction
With the legal commencement of the accession negotiations between Turkey and European Union “EU”, the relationship between Turkey and EU came to a new and important phase by overcoming a critical turning point. Another significant aspect of this accession period is the increase in importance of the economic criteria, the political criteria and especially harmonization with the EU Legislation.[1]
At the beginning of the negotiation period of Turkey, EU Legislation was classified under thirty five titles in the scope of Turkey’s negotiation process. Currently, this process is maintained under thirty three separate titles by holding introductive and detailed screening meetings related to the harmonization of Turkish national legislation with the EU Legislation and negotiating on the mentioned thirty three areas.
Accordingly, Turkey periodically publishes detailed study programmes with the purpose of defining its position related to the mentioned titles of the acquis and the changes deemed required.
“Council of Ministers Resolution on Implementation, Coordination and Monitoring of the Turkish National Programme for the Adoption of the EU Legislation” which became effective by being published in the Official Gazette of 31.12.2008 sets the general principles for implementing the Turkish National Programme for the adoption of the EU Legislation (“National Programme”). This National Programme is a documentation including works envisaged to be executed in the short term and medium term, under thirty tree acquis titles constituting the negotiation process. There are also detailed explanations under one of the mentioned titles, “Taxation”.
In the National Programme, Taxation Title is classified under three main sub-titles in the order of priority, and some of the changes defined in the sub-titles are envisaged to be conducted within 2009, whereas some of them are to be conducted between 2010 and 2011, and the rest of the changes are planned to be performed after 2011.
The main subject of this article is to present the changes related to taxation area, which are defined in the Taxation Title of the National Programme and envisaged to be realized in 2009. When reviewed, it is seen that the basic purpose of the mentioned changes is the harmonization of the excise tax applications with EU Legislation and approximation of the excise tax rates with those of EU with the aim of reducing the discriminatory taxation over the alcohol and alcohol products as well as some tobacco and tobacco products.
2. Turkish National Programme for the adoption of European Union Legislation
“The Resolution on Implementation, Coordination and Monitoring of the Turkish National Programme for the Adoption of the EU Legislation” was approved by the Council of Ministers on 10 November 2008; the related Council of Ministers Resolution no. 2008/14481 came into effect by being published in the Official Gazette no. 27097 of 31 December 2008.
As already mentioned, National Programme covers the areas envisaged to be performed in the short term and medium term during the Turkey’s accession process to EU, and it was prepared for defining the main elements of the works to be performed by Turkey related to this issue.
The “Taxation” title is among the titles approved by EU Council, for which opening criteria are defined. Therefore, when the opening criterion for this title is fulfilled, negotiations will be started for the Taxation title.
3. A general overview of the regulations of EC Agreement on the taxation field
Basic regulations on the taxation are included in the Treaty Establishing The European Community[2] (“EC Treaty”) which is one of the four main treaties regulating the operation of the Union.
Within this context, in the Articles 90, 91 and 92 of the mentioned Agreement, there are provisions on preventive measures, which may cause discriminatory effects on taxation of commercial transactions within the Union.
With the Article 93 of the same Agreement, the European Council was granted authorization for enacting regulations on the sales taxes, excise taxes and other indirect taxes for the purpose of ensuring the order and operation of the EU internal market.
Consequently, in the Article 94 of EC Agreement, it is stipulated that European Council is entitled to publish directives for the approximation of the laws, regulations and administrative provisions that may be legislated by the member states and have direct effects on the establishment and operation of the common market.[3]
In the light of these provisions, it can be concluded that taxation policy of European Union is based on three main principles:
Ø Preventing the discriminatory measures in taxation area that may result from the internal legislations of the member states,
Ø Harmonization of the tax legislations of the member states (basically, preventing that indirect taxes constitute an obstacle in the free movement of goods and services),
Ø Approximation of the tax rates and the applications of Member States in the areas of indirect and direct taxation.
4. Content and regulation of taxation section within the National Programme
When the Taxation Title is considered within the framework of general negotiation process, it is seen that there are four main areas in terms of harmonization of Turkish tax legislation with the EU Legislation, which are emphasized for the short and medium term[4]. These four main areas are as follows:
Ø Harmonization of the Turkish indirect tax legislation with the EU Legislation,
Ø Approximation of Turkish direct tax legislation and applications with the EU Legislation,
Ø Making progress in the administrative cooperation and mutual assistance,
Ø Making progress in the operational structuring of Turkish Tax Authority and ensuring its transition to the computerized system.
4.1. Sub-titles of the Taxation title in the National Programme
The sub-titles under the Taxation title are presented below with their numbers:
Ø (16.1) Submitting an Action Plan, which is also approved by the European Commission and in which the milestones are defined, with the purpose of taking the applicable steps for significantly reducing the discriminatory taxation related to alcohol products, imported tobacco and imported cigarettes, and immediate elimination of other types of discriminatory taxation,
Ø (16.2) As for the Special Consumption Tax (“SCT”) and Value Added Tax (“VAT”), maintaining the harmonization studies especially related to their structures and rates applied,
Ø (16.3) Maintaining the reinforcement and modernization of the Tax Authority including the Information Technology sector with the aim of increasing the harmonization, improving the collection of tax income and reducing the unrecorded economy.
4.2. Changes envisaged in the field of special consumption tax for 2009 as per the National Programme
For the better understanding of the technical content of the studies envisaged to be performed within 2009 on SCT in National Programme, we believe that a general review of the regulations of EU Legislation on the excise duties would be useful.
4.2.1. General regulations related to excise duties in the EU Legislation
In the EU 92/12/EEC Directive regulating the basic structure of the excise duty applications, there are regulations on application rules and methods of the excise duties on the energy products, tobacco products and alcoholic beverages which are defined as products which are subject to excise duties. In this Directive, the production, storage and delivery of products subject to excise duty are also regulated as well as the determination of the minimum specific tax amounts that can be applied within EU.[5] Pursuant to this Directive, Member States shall impose excise duty on these products at least over the minimum specific tax amounts which are defined as the proportional rate or a fixed amount for the EU. Besides, member states are entitled to impose excise duty on other products, provided that they do not cause any bureaucratic obstacles preventing trade between each other.[6]
The other EU Directives which regulate the excised duties on the mentioned products are:
Ø Alcohol and alcoholic beverages: Regulations related to the nature of the tax are set in the Directive 92/83/EEC; and minimum specific tax amounts are defined in the Directive 92/84/EEC.
Ø Tobacco and tobacco products: Regulations on cigarettes are included in Directive no. 92/79/EEC, regulations on other tobacco products are included in Directive 92/80/EEC, and structural regulation of the tax to be imposed over the all tobacco products is defined in the Directive 95/59/EEC.
Ø Energy products: Regulations on the excise duty applications on the energy products are included in the Directive 2003/96/EEC.
According to EU Legislation, excise duty is levied when the goods subject to taxation are produced within the Union or are imported to EU from a third country. However, the tax shall be paid over the tax rates of the country in which the goods are introduced to the market (sold in the market).
4.2.2. Preparation and submission of the Action Plan related to the discriminatory taxation of alcoholic beverages, imported tobacco and imported cigarettes
Pursuant to the procedures related to the negotiations within the Negotiating Framework of Turkey, for the opening of any of the titles defined for the harmonization of Turkish National Legislation with EU Legislation, European Council sets opening criteria and informs Turkey on these criteria. As a result of this, Turkey is requested to define its position related to the acquis, and inform about its progress in fulfilling the criteria.[7]
Accordingly, the opening criterion for starting the negotiations on the Taxation Title is the preparation and submission of an Action Plan that would also be approved by the European Commission. This Action Plan that is envisaged to be prepared within 2009 should aim to reduce the discriminatory taxation on the alcohol products and imported tobacco and cigarettes; and for the immediate elimination of other types of discriminatory taxation, and it should also be approved by the European Commission.
If European Union decides that this Action Plan fulfils the required opening criterion sufficiently, the negotiations would be actually started under the Taxation title. Details on the Turkey’s SCT applications related to the alcoholic products and imported tobacco and cigarette constituting the subject of the Action Plan are presented in the following sections.
4.2.3. Approval of the Council of Ministers Resolution related to the changes to be performed on the SCT rates (with regard to the taxation measures and rates in alcohol and alcoholic beverages)
4.2.3.1. Excise duty regulations on alcoholic beverages defined in the EU Legislation
Pursuant to the National Programme, a study related to SCT planned to be performed in 2009 in accordance with the Action Plan is the approval and entering in force of a Council of Ministers Resolution regulating the taxation measures and rates of alcohol and alcoholic beverages. In the related section of the National Programme, it is stipulated that this regulation should be in compliance with the Directive no. 92/84/EEC.
The Directive no. 92/84/EEC regulates the approximation of excise duty rates to be applied on the alcohol and alcohol products and defines the minimum specific tax amounts. Pursuant to this Directive, member states of EU shall comply with the minimum excise duty amounts defined according to the alcoholic beverage categories specified in line with the Directive no. 92/83/EEC, and they are free to impose excise duties over the determined minimum specific tax amounts.
The minimum specific tax amounts defined in the Directive no. 92/84/EEC and specified in five categories in the Directive no. 92/83/EEC are as follows:
Ø Beer: Minimum specific tax amount can be determined according to two criteria. First one is the criterion which is named as “Plato” and defined on the basis of the sugar weight in the 100 grams wort within the product. According to this criterion, minimum specific tax amount on the beer is defined EUR 0.748 per hectoliter/degree Plato. The second criterion is based on the percentage of the alcohol volume within the products, and according to this criterion, the minimum specific tax amount to be applied is EUR 1.87 per hectoliter/degree of alcohol.
Ø Wine and other fermented alcoholic beverages: The minimum excise tax on the wine and other fermented alcoholic beverages is defined as “zero”. Therefore, member states are free to either determine the excise duty as “zero” on these products or apply any amounts they prefer.
Ø Intermediate products: Minimum specific tax amount for this product category is calculated over the volume of the product, and it is Euro 45 per hectolitre.
Ø Ethyl alcohol: It is Euro 550 per hectolitre of pure alcohol.[8]
4.2.3.2. Regulations on the alcoholic beverages defined in the Special Consumption Tax Code
In Article 1 of the Special Consumption Tax Code, there are lists of goods to be subjected to SCT for once, and the treatments which these goods shall be subject to SCT are explained. Alcoholic beverages are listed in the (A) table of the list no. III attached to the Code, and it is stipulated that these goods shall be subject to SCT during the import process or manufacturers delivery.
Pursuant to the Article 11 of the SCT Code, taxation of the alcoholic beverages is based on the proportional tax application, not to be less than the tax amount to be calculated according to the minimum fixed tax amounts defined for these goods. In other words, proportional tax amount and minimum fixed tax amount of a product are compared and higher tax amount is imposed.
In alcoholic beverages, proportional tax amount is 63,3% for beer and wine where the rate is 275,6% for other alcoholic beverages. SCT base is comprised of elements constituting the VAT base in the delivery, first acquisition and import of these goods. Method of determination and amounts of the minimum fixed taxes vary according to the type of the products.
In the determination of the minimum fixed tax amount on different products, alcoholic beverages are divided into three categories according to SCT Code and the criteria are determined in line with these three categories:[9]
Ø First category: Minimum fixed taxed amount is determined according to the alcohol volume rate in a litre of product. Minimum specific tax amount of TL 0, 2380 applied on the beers produced from malt depending on the alcohol volume may be given as an example.
Ø Second category: The volume of the product is taken as the basis, and minimum tax amount is determined over a litre of product. Products for which minimum fixed amount is determined in this way are fresh grape wine, sparkling wine, vermouth and other fresh grape wines, and other alcohol beverages fermented with products with alcohol level of 18% or lower.