The earthquake taxes collected in Turkey are not being used on earthquakes

As the shock of the 7.7 and 7.6 magnitude earthquakes that hit southeast Turkey on February 6 continues, many question the fate of the earthquake taxes collected since 1999. In 1999, Turkey had experiences two earthquakes of magnitudes 7.4 and 7.2 in its Midwest, and nearly 20,000 people had lost their lives. The government of the time had passed new taxes to heal the wounds of the disaster and to prepare the country for future earthquakes.

In Istanbul, the country’s largest metropolis and the heart of its economy, residents are preparing themselves for an earthquake over magnitude 7.0. How much of the money collected through the taxes has been used for earthquake preparedness is unknown. The February 6 earthquakes raised the question of how efficiently these taxes have been used.

What is the earthquake tax?

The taxes known by the public as the “earthquake tax” had been declared as a one-off. Within the scope of the additional taxes instituted following the earthquake on November 26, 1999, an additional 5 percent tax was collected from income and corporate taxpayers over their 1998 tax bases. The additional real estate tax, which was levied from real estate owners over the 1999 real estate tax bases, was paid in two equal installments, in December 1999 and March 2000. In addition, the Motor Vehicle Tax was collected from vehicle owners.

While these taxes were collected only once, the Special Communications Tax (OIV), popularly known as the earthquake tax, was first set up as a one-time tax and its rate was determined as 25 percent to be implemented until 12/31/2003. OIV, which was expanded and made permanent in 2004, was collected at a rate of 7.5 percent until recently. The rate of the OIV was increased again during the Covid 19 pandemic. With the Presidential Decree published in the Official Gazette dated January 30, 2021 and numbered 31380, the rate of the OIV was increased from 7.5 percent to 10 percent.

SCT is levied based on the mobile phone usage fee and is a type of tax that provides quick income because it is collected from mobile network operators.

Where have earthquake taxes been used?

The earthquake tax collected between 2000 and 2022, when calculated using the average exchange rate of that year, amounts to 38,227,000,000 dollars.

Building 1,315,000 houses was possible between the years 2000 and 2022, according to calculations made based on residences of 96 square meters, one of the most common types provided by the Mass Housing Development Administration (TOKİ), which is the state’s mass housing institution.

While the earthquake tax was made permanent in 2003, the Minister of Finance of that time Kemal Unakitan had said, "These taxes were imposed temporarily, but they still continue. These taxes were not instituted for earthquakes. If they had been, they would have been collected once and it would have been over and done with. What is the name, sir, of these 'earthquake taxes?’ We want to make the necessary arrangements and come out clearly to the nation, saying, ‘this is such and such.’ Nobody should deceive anybody.”

On the subject of the uses of the earthquake taxes, Former Finance Minister Mehmet Simsek said in a statement after the 2011 Van earthquake that the money collected had been used for two-way roads, airports, and health expenditures. Simsek used the following expressions: “After all, this is the wealth of 74 million. These taxes go towards our health… They go towards two-way roads, to railways, to airlines, to our farmers, to education.”

Tax expert Dr. Ozan Bingol who notes that governments do not relinquish taxes easily, says, "The special communication tax is an efficient and easily collectible tax. As a matter of fact, it can be collected through a few operators and internet service providers without incurring much cost."

Stating that earthquake taxes are regulated within the scope of the Excise Tax Law, Bingol says, "Both in Turkey and in the modern world, taxes are not allocated to certain expenses. They are collected in the budget to meet public expenditures and spent for public needs." In other words, Bingol states that it is not possible to allocate earthquake taxes specifically to earthquakes.

After the February 6 earthquakes, it seems that the Turkish economy will need a great deal of financing. It will not be easy for the government to impose a new tax either, as the public will be questioning the fate of the taxes collected for the past 24 years.