Expanding the Tax Base and Introducing Expenditure Audits: Economic Implications

The President of the İzmir Certified Public Accountants Chamber (İYMMO), Yaşar Zengin, highlighted that the narrow tax base, rather than high rates, is the core issue in Turkey’s tax system.

Macro Implications of a Narrow Tax Base

■A narrow tax base concentrates fiscal burden on a limited group of taxpayers, undermining tax equity.

■The informal economy still accounts for roughly 30‑35% of activity, representing a substantial loss of potential revenue.

■Raising tax awareness can permanently expand the base for VAT and income tax.

Digital Audits and Data Integration

■The Revenue Administration and Tax Inspection Board’s digital infrastructure—e‑invoicing, e‑ledger, electronic filings, land‑registry and notary data—has the potential to boost audit capacity by 40%.

■Cross‑checking expenditure, income, and asset data becomes a decisive tool for spotting inconsistencies.

Sector‑Specific Approaches and Policy Recommendations

■Real‑estate and construction sectors should revisit subcontractor taxation; informality in these sectors reaches 45%.

■Certified public accountants currently work under full certification for 45‑50 000 firms; scaling this up two‑ to three‑fold would markedly improve compliance.

■Sector‑tailored tax models that incorporate spending patterns, not just revenue declarations, can deliver a fairer tax burden distribution.

Expected Impact and Outcomes

■Expanding the tax base could generate an additional TL 10‑15 billion in annual revenue.

■Strengthened digital audit mechanisms may cut evasion and irregularities by 25%.

■Over the longer term, a broader tax base could help narrow the fiscal deficit by 2 percentage points, supporting sustainable public spending.

A narrow tax base limits not only revenue‑raising capacity but also deepens economic inequality. Digital data integration and the alignment of expenditure, income, and assets introduce a new paradigm for combating informality. Steering policy in this direction will bolster both tax equity and macro‑economic stability. – Dr. Aslıhan Demir, Macro‑Economics and Monetary Policy Scholar