A New Digital Service Tax for the Transformation of the Taxation Architecture in Turkey

Introduction

We are the witnesses to an age in which the existing tax systems are inadequate for the taxation of novel business and trade models arising from the sweeping and day-to-day changes and advancements in the digital economy, which has become a topical issue as a result of the integration of technology and economics. The inability to duly tax the income generated by digital economic activities despite the fact that this income has reached significant levels has forced institutions and organizations like the OECD and the EU as well as national governments to take action. In this respect, there are efforts to regulate national and international taxation guidelines and taxation practices suitable for novel business and trade models. One of the topics coming to the fore as a result of these efforts is the digital services tax (DST). The reason behind the prominence of the issue is that in parallel with the digitalization of economies in the present day, many countries in the world have sought to tax digital services as they have significant tax potential.

On the other hand, a series of necessary structural transformations have started to be implemented in Turkey within the scope of a new economic program delineated under the title “The New Economic Program: Steps for Structural Transformation 2019”. Concerning the issue of tax transformation within these steps for structural transformation, there have been certain initiatives to establish the “New Taxation Architecture”. Within the scope of said initiatives, a brand-new taxation practice called the “digital services tax (DST)” is envisaged. Essentially, this step taken by the Turkish government to introduce taxes on digital services is in parallel to global developments.

Taking the intensive use of digital services in the economy of Turkey into consideration, one might argue that the taxation of digital services may lead to the realization of considerable tax potential. In order to clarify the necessity/importance and nature of the digital services tax, the present study aims to evaluate the digital services tax envisaged to be implemented in Turkey in light of global developments, taking the subject, basis, rate, and exceptions of the tax into account, and considering all its aspects. In this respect, the study initially puts forward a general overview of global developments regarding digital services and their taxation. Then, it continues by providing detailed information about and an assessment of the taxation transformation in Turkey within the scope of “The New Economic Program: Steps for Structural Transformation 2019” and the digital services tax to be levied as a part of these steps.