Turkey’s Finance Ministry Harnesses AI to Combat Tax Evasion
Introduction
In a significant move to enhance fiscal integrity, the Finance and Treasury Ministry in Turkey has established specialized teams employing artificial intelligence (AI) technologies to detect instances of tax evasion. This initiative is expected to bolster the country’s tax compliance landscape and ensure fairness in taxation.
Data-Driven Initiatives
The newly formed teams comprise tax experts who meticulously analyze information and tips provided by the public on various social media platforms. This proactive approach allows the ministry to respond swiftly to potential tax evasion cases.
Finance Minister Mehmet Şimşek stated on social media platform X, “To detect discrepancies in VAT, our Tax Inspection Board, the Revenue Administration, and the General Directorate of Risk Analysis have completed their artificial intelligence-supported work.”
Focused Inspections
Field inspections will now target companies suspected of exploiting lower VAT rates, which are primarily designed to alleviate the tax burden on essential goods. Minister Şimşek emphasized the commitment to pursuing businesses profiting unfairly through tax evasion practices.
“We will continue to pursue those who gain unfair profits by causing tax loss and evasion and those who create unfair competition,” Şimşek asserted.
Current VAT Rates in Turkey
In Turkey, the VAT rates vary significantly across different sectors: stable foods and medications are taxed at 1% and 10%, respectively, while cosmetics are taxed at a standard rate of 20%.
Alarmingly, some companies misclassify cosmetic products as dietary supplements, thereby evading the appropriate tax and resulting in substantial revenue losses for the state.
Manipulating Restaurant Tax Rates
Similar manipulation occurs in the restaurant sector, where the VAT rate on food services stands at 10%, while delivery services are taxed at just 1%. Reports indicate that some establishments are employing these same deceptive strategies.
Officials have also noted that certain local supermarkets exploit these VAT discrepancies to underpay taxes, prompting a need for rigorous oversight.
AI and Algorithmic Solutions
In response to these irregularities, the Finance Ministry has initiated efforts to combat tax losses and evasion through the utilization of AI and algorithms. This technological approach aims to accurately identify companies that do not comply with tax regulations.
In a concerted effort, officials will conduct inspections on 100 large companies suspected of violating tax laws.
Engaging with Citizens
Furthermore, a dedicated social media team has been established at the request of Minister Şimşek to investigate user reports regarding tax evasion. This initiative represents a shift towards increased transparency and civic engagement in tax compliance matters.
Recently, in response to a consumer’s post featuring a sales slip that indicated a restaurant had charged a lower VAT rate, Şimşek acknowledged the issue by stating, “Thanks for bringing this issue to our attention. The respective units at the Finance Ministry will keep a close eye on such practices.”
Recent Trends in Tax Revenue
It’s noteworthy that Turkey saw a remarkable increase in tax revenues last year, soaring by 91% from 2022 to a total of 4.5 trillion Turkish Liras. VAT collection alone surged nearly 190%, reaching 506 billion liras, while special consumption tax revenues escalated by 121% to 928 billion liras.
Conclusion
Turkey’s Finance and Treasury Ministry is setting a precedent by integrating advanced technologies like AI into traditional tax inspection methods. By focusing on transparency, citizen engagement, and the rigorous enforcement of tax laws, the ministry aims to create a more equitable tax system that curtails evasion and fosters fair competition.
