ECONOMY

Tax veto hurts Turkey

ANKARA – Turkey’s government yesterday pledged rapid action to deal with a $3 million-a-day budgetary headache caused by a presidential veto in the dying hours of 2002. Late on Tuesday evening, President Ahmet Necdet Sezer objected to some sections of a package of financial measures that would have extended a range of taxes and levies into 2003. He vetoed the entire package. Finance Minister Kemal Unakitan said the government would override Sezer’s veto and push the measures through Parliament. If Parliament passes the package of measures unchanged for a second time, Sezer must ratify it or appeal to the constitutional court. «The daily cost of the law not going into effect is 5 trillion lira (around $3 million),» Unakitan told Reuters in an interview. «We want to pass it into law in January.» Although the government will rush to reintroduce the measures, officially they lapsed with the old year and yesterday companies began falling into line with the law. Turkish Airlines said it would stop charging the levies on its ticket sales. The «special transaction tax» represented a charge of 1-4.5 million lira ($0.60-2.7) on every ticket sold. It was just one of a set of taxes introduced as temporary measures after Turkey’s 1999 earthquake but due for extension into 2003. In theory, state offices should follow the airline’s lead and drop charges on some bureaucratic transactions. Cinema tickets should also become cheaper and mobile phone bills drop. The lost revenue is a major sum for a country struggling to tighten its budget under a $16 billion IMF lending program. Sezer’s veto also hit extensions to tax exemptions on profits on numerous financial instruments, including shares, that Turkish markets had expected to continue into 2003. The newly elected ruling Justice and Development Party (AK) had used the package to cancel tax reforms dubbed «financial year zero» planned by the previous government to take effect on January 1, 2003. The reforms aimed to bring unregistered cash into the system and fight corruption and the unregistered economy but critics said it was heavy-handed and likely to discourage investment. Sezer said canceling the reforms would set back the fight against corruption and vetoed the entire package. Sezer, a former top judge and legal expert, gives legislation intense scrutiny and his regular battles with the previous government over the details of legislation was a major factor in the lead-up to the country’s financial crisis in 2001. Unakitan said the Justice party’s plans for tax reform, which it dubs «tax peace,» were taking shape in cabinet and aimed to resolve some 180,000 disputed tax cases and earn 10,000 trillion lira in revenue.