The recent developments show us that the public sector has no intention at all to reduce spending. However, it’s clear that the public sector wants citizens to further compromise so as to generate more revenues. As the echoes of the removal of CBRT Head continue, a new bill was introduced to the Parliament. I’ve tried to explain the issue in details on television yesterday. It’s the duty of the Parliament to impose new taxes. Tax revision, on the other hand, must be subject to Presidential Decrees.
The day when a Presidential decree was issued to impose taxes on Foreign Exchange Transactions, I called some influential people and said, “That’s not the way you impose taxes. The Parliament should be the one authority to impose taxation”. “You’d be totally right under normal circumstances. But, this is not new tax. This is the revision of an old one”, they responded.
I can see that the Government avoids making the same mistake again by introducing a new tax bill in the form of an omnibus bill to the Parliament. However, it can be clearly seen that there’s a huge funding gap which severely affects a lot aspects including CBRT’s reserve funds. There are rumors that the public sector may delay payment of salaries to employees. I hope they are nothing but rumors.
“Just when we were making fun of Greece…”
The truth is steps taken by governments to achieve growth will inevitably cause economic shrinkage after a while. Issues in real tax revenue and added-value creation arise when public sector grows too large. As the government keeps spending all the funds, especially the ones allocated to investments with an expected revenue of at least 30-year long, financing problems will unavoidable arise in the short and medium term. Both private and public sector incur huge losses due the ill-planned execution of deregulation and privatization activities.
In short, although the recently introduced Tax Bill is technically right, it’s also an important parameter in terms of indicating the major funding gap in public sector.
Except for interest payments, the public sector won’t be able to avoid falling into a debt spiral as long as Government Spending exceeds Government Revenue. It would be truly tragicomic for Turkey to face the same situation especially when we used to make fun of Greece.