Over 62,000 Turks joined millionaires club in first 9 months of the pandemic

K. Murat Yıldız / Duvar English

On April 12, UN Secretary-General Antonio Guterres urged governments to consider levying a "solidarity or wealth tax" on the wealthy who profited during the coronavirus pandemic in order to provide states with money to support the vulnerable populations affected by the global pandemic.

“A paradigm shift is needed to align the private sector with global goals to face future challenges, including those caused by COVID-19,” Guterres was quoted as saying at a meeting of the Economic and Social Council Forum on Financing for Development,

He added that “the latest reports indicate that in the last year there has been an increase of five trillion dollars in the assets of the richest in the world. I urge governments to consider applying a solidarity or wealth tax to those who have benefited during the pandemic, to reduce extreme inequalities." He then reiterated a call for all countries to have access to COVID-19 vaccines.

Furthermore, Guterres also called for policies that would provide liquidity to countries in need, rather than focusing on debt collection.

Several world leaders supported Gutteres’ call to tax the wealthy. The Argentinian government passed a "millionaire's tax" in early December last year, hoping to collect nearly 4 billion dollars from around 12,000 people to be used in the countries fight against the COVID-19 pandemic.

Similar calls have been made by politicians and experts in Turkey, especially after Turkish Banking Regulation and Supervision Agency (BDDK) data revealed that the number of people with 1 million liras or more in the bank increased and saw their assets grow by 410 billion liras from March 2020 to the end of the year following the outbreak of the pandemic.

According to BDDK data, the number of millionaires in Turkey at the start of the pandemic in March 2020 was 246,136, and by the end of the year, it had risen to 308,278, adding 62,142 new individuals to the list of Turkish millionaires in only 9 months.

Funds from new tax could be spent anywhere

According to Financial Law Associate Professor Murat Batı, there are some legal, practical, and technical challenges in enacting a "COVID-19 Tax" in Turkey.

Referring to the so-called "Earthquake Tax," which was imposed temporarily after the 1999 Gölcük earthquake before being made permanent in 2003 and increased from 7.5 percent to 10 percent by the ruling Justice and Development Party (AKP), Batı stated that the funds raised for pandemic relief efforts with a new tax could be used anywhere according to existing laws and regulations.

It's been a lingering question in the country about what happened to the 70 billion liras collected from the "Earthquake Tax" over the last two decades, which was supposed to be used for earthquake relief efforts.

Following a public outcry after the devastating Van Earthquake in 2011, former Finance Minister Mehmet Şimşek told the press that the money raised for earthquake relief was used to build roads, hospitals, and airports, as well as for agriculture and education.

Batı emphasized the Turkish Constitution's "Principle of Equality," which prohibits taxation of "a certain group" and noted that “in the past, the Constitutional Court invalidated regulations concerning the taxation of a specific group. If such a 'wealth tax' is enacted, the Constitutional Court will almost certainly strike it down,” Batı told Duvar English.

Difficult to implement

Associate Professor Baki Demirel told Duvar English that he supports the idea of a "wealth tax," but that it will most likely only become a reality if it becomes a global practice, as it would be difficult for any single country to implement it on its own.

Demirel, on the other hand, noted that such a tax would only be successful if it was coupled with capital controls that limit damages of hot money flows and prevent capital flight.

Pointing to other deeply rooted tax problems Demirel told Duvar English that “Turkey's tax policies are generally incorrect. Indirect taxation has a significant negative impact on inflation and wealth inequality,” he said, adding that income and property taxes should be raised, and a wealth tax should be imposed “not to finance state spending, but to pay the debts of the poor and support vital fields like agriculture.”

Guterres' call is backed by Turkish opposition

Guterres’ call for a "solidarity or a wealth tax" was welcomed by Turkish opposition politicians such as Republican People's Party (CHP) Secretary General Selin Sayek Böke, who pointed out that the pandemic brought to the world’s attention the existing deep socio-economic inequalities by further deepening said inequalities.

“It is timely to discuss alternative means of achieving a progressive tax system, both within the international tax system as well as our national tax frameworks. The world has been discussing several alternatives, which range from the United Nation’s proposals of considering solidarity or COVID-taxes to the global minimum taxation negotiations led by the Organization for Economic Co-operation and Development (OECD),” Böke told Duvar English.

Wealth in the hands of a few

Böke also called on the government to create a comprehensive progressive change in the tax system and said that the existing system of the ruling party “has led to a wealth concentration in the hands of a few, and we know this rent-based wealth has not only benefited from significant tax restructuring and amnesties granted by the ruling party, but have also fled to tax havens. As such, a first step towards a more progressive tax system should be to enlist the tax havens and start taxing these rent-driven activities.”

Böke concluded by saying, “This comprehensive change should synchronously focus on revamping the spending side of fiscal policies. The composition of fiscal spending has to be overhauled to be more in line with the much-needed efficient and solidarity-based welfare state structure and a redefinition of the role of public services in especially rights-based driven areas such as health, education, housing among others as well as strategic sectors.”