Turkey: Here Are What 64th Turkish Government Promises

Last Updated: 23 February 2016
Article by Serap Zuvin and Yigit Turker

The general election of Turkey was held on November 1, 2015 and four (4) parties have taken their place in the Turkish Grand National Assembly with the percentages: Justice and Development Party ("AKP") (49,48%), Republican People's Party ("CHP") (25,31%), Nationalist Movement Party ("MHP") (11,90%), People's Democratic Party ("HDP") (10,75%).  AKP formed the Government alone on November 24, 2015 with the 64th Government Program ("Government Program"), which was published on November 25, 2015. This article, summarizes certain topics of the Government Program; Employment and Social Security, Finance and Monetary Policies, Tax and Incentives for the convenience of business cycles interested in Turkey. Although 64th Government Program has much to offer, the scope of this article is limited with the above mentioned headlines.

Employment and Social Security are the two the main focuses of the Government Program.

The Government undertakes to provide with full-paid working conditions to all female workers, although they will be working part-time for 2 months following their giving birth to the first child; 4 months for giving birth to the second one and 6 months for giving birth to the third or more children. The Government further provides the right to women to work as part-time until their children reaches the school age. The Government further undertakes to make arrangements to create new dialogue options with all social parties in order to solve issues on severance payment system.

National Profession Standarts will be prepared and brought into force based on the demands from the sector, and the standards which were already enacted will be renewed during five years. The Occupational Health and Safety Action Plan will be adopted based on the European Union and ILO standarts. The process of obtaining working permit for foreigners will be simplified.

The 64th Government will remove the obligation to employ 10 workers in order to receive an Employer Security Premium discount with a rate of 6%, which is applied in 51 provinces. 251 small businesses will enjoy such opportunity. In the event that the citizens, who recieve social aids are employed; the Government will cover the portion of employer's insurance contribution.

Finance and Monetary Policies are key points of the Government Program unsuprisingly!

Turkey will continue to grow and sustain the stability by increasing the local savings and directing the same to more productive areas, increasing private sector investments in order to increase the gross domestic product share of manufacturing industry and improving the labour productivity. Inflation targeting will continue to be the main monetary politics regime. Inflation targeting will be determined by the Central Bank and the Government for three terms. Floating exchange rate regime will be continued. Self determination of the monetary policy tools directly by itself in order to keep price stability will continue to be Central Bank's principle.

The previous Government had doubled the amount of 1 billion Turkish Liras to 2 billion Turkish Liras which can be transferred from the treasury sources to credit guarantee institutions. 64th Government will create an opportunity to give the treasury guarantee up to 20 billion Turkish Liras through Credit Guarentee Fund. The Government undertakes to actualize Istanbul International Finance Center Privileged Transformation Program. The Government aim, Istanbul to become among the top 25 cities which are global finance centers and Turkey will become in the top 30 countries based on financial development level by the end of the Program term. In addition, the Government also plans to increase the share of financial services sector in the Gross Domestic Product, from 3,4% to 6%.

The Government will establish experts courts in the finance sector. The Technology Development Center will be established in order to develop information technology products required by the financial markets. The 64th Government will improve transportation means and communication infrastructure starting with the railway systems in Istanbul International Finance Center cluster zones.

The Government will create a mechanism for the coordination of interest-free loans and determine the ethical and corporate governance principles and will boost the product and service variety. Istanbul Stock Exchange Common Database will be institutionalized and Special Capital Platform under Istanbul Stock Exchange will be established. The 64th Government undertakes to improve the investment and development banking system which can provide long term financing for the investments. The Government will take necessary measurements in order to reduce costs and improve accessebility on financing of the investments beginning with the small and medium sized enterprises and qualified infrastructure investments. In order to keep the market economy efficient and away from public intervention, 64th Government will continue to have the principal to perform the State Economic Enterprise activities with higher quality by aiming to achieve its economical purposes and aims.

The Government will use the public investment as an active tool to decrease the development level differences between regions and to put to good use of regional develoment potential. The Government will prioritize the projects under the regional action plans such as The Southeastern Anatolia Project, Eastern Turkey Project, Konya Plain Project and Eastern Black Sea Project. With the "Prioritized Transformation Program on Decreasing the Dependency on Importation", the Government is aiming the decrease foreign trade deficit ratio to gross domestic product.

How new Tax and Incentives will meet Turkish business world?

The 64th Government undertakes to give unrequited support up to 50,000 Turkish Liras to young people who want to start a business for their projects. In addition, interest-free loans up to 100,000 Turkish Liras will be given to young people who want to start or develop a business. An exemption to pay income tax for three years will be provided for young people who start a business. In addition to that, it is aimed to increase the ratio of exportation against importation up to 70%. By improving the quality of exportaton, the variety of middle, high technology products and their share in the exportation market will be increased up to 40%.

The Government will update the Input Supply Strategy by paying attention to Turkey's input supply need inventory. The 64th Government will continue to encourage strategic sectors and large-scale investments. A new Income Tax Law will be enacted by merging Income and Corporation Income Tax Laws. The Government will bring tax encouragements which will support high technology importation and related investments.

The 64th Government also undertakes to revise the Stamp Tax Law in order to reduce off the books, to ease the burdens on the investments and productions and to prevent duplications. In addition to that, the Government will enact a new Tax Procedure Law in order to make it easier to apply and to comply with economical and social policies. Moreover the Government undertakes to provide tax advantages to the usage of the equity. The previous Government brought tax advantages to financing with the equity and by the law encated on March 26, 2015. The 64th Government will provide the opportunity to reduce the certain amount of capital increase from the annual profit of the company for the companies which are increasing capital in cash.

The Government will review the practices concerning the taxation of the incomes of value increments arising from real estate sell-outs. The taxation practices concerning financial tools and their underlying assets will comply with each other. In addition, the 64th Government will remove the taxation practices, which cause unfair competition, between different financial institutions. The Government will also evaluate the economical, social and enviromental impacts of agricultural incentives. Furthermore, food security and sustainabilty of natural sources will be supervised by ensuring the effectiveness of incentives. By paying regard to international obligations, the Government will put deterrent taxes to luxurious and/or highly imported products. The 64th Government will renew and modernize the customs gates and customs and will develop ad hoc saving mechanisms in order to encourage long-term savings.

All of the remaining plans of the Government will be discussed in our forthcoming article, namely "Here Are What 64th Turkish Government Promises - Sectors" to be published within next month, i.e. March 2016, We kindly invite you to follow our article series regarding the 64th Turkish Government Program in order to be aware of all significant points on this issue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Serap Zuvin
Yigit Turker
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