Q: You have overseen quite a number of reforms to the tax environment – what reforms might still be ahead, and what is the general tax situation for foreign companies wishing to set up in Turkey?

A: First of all our tax system needs some overhauling, it needs some work, no question about it. The idea is to simplify the tax system, to make it more predictable. So far we have reduced corporate tax rates, income tax rates, some other taxes, and we've actually increased consumption taxes, because we would like to support employment, investments, and exports, and we would like to constrain spending. For foreigners, if you are to invest in Turkey, if you are to produce an item that we mainly import, you will get seven years of complete tax breaks, almost, [and a] corporate tax rate of 2%, until you recover 50% of your investment, sometimes more.


There is a draft on income tax reform in the parliament, which is about simplification, about broadening the tax base, very basic stuff. We're also working on a tax procedure law which we'd like to reform, because it's a little outdated. The corporate tax top rate is 20%, but as I said for new investments it's as low as 2%. The income tax top rate is 35%, but for minimum wage earners it's as low as 0%.

So, despite the perception, tax rates are not that high. Tax rates are high on tobacco, cars, petroleum products, alcoholic beverages and telecommunications, but for the rest, tax rates are pretty decent.

Q: Some have commented that Turkey is not yet a ‘normal’ country politically, although it is moving that way. What would you say to that?

A: What is politically normal? [Turkey is] normal in the sense that we have just had local elections, 23 parties participated. Turkey has had almost a century of democratic experiment, you’ve got separations of power, you've got the parliament, you've the executive, you've got the judiciary.

Yes, there have been some recent headlines that would suggest some tampering, but much of the debate [in the media] is on the first draft [of legislation]. And usually the first draft of any piece of legislation will not be perfect. It gets corrected at the commission level, or at the general assembly, and even if something goes through that doesn't seem right, the president tends to get it amended, or the constitutional courts do. If there is something that goes through the system but that is not fully compliant, let’s say, to the international rule of law, to international fundamental rights and freedoms, or in terms of standards of democracy, it gets basically cancelled.

Thus, I think if we were debating the final product in terms of legislation, much of the final stuff that came out of parliament or finalised is pretty much in line with global norms. 

Q: How far away is Turkey from EU membership?

A: It’s a political question. As far as technicalities are concerned, if Europe was committed to letting Turkey in, we could very quickly wrap up the technical negotiations. But the politics of enlargement, following the big bang of enlargement and following the Dutch 'no' [in a 2005 referendum, the people of the Netherlands voted against ratifying the EU constitution], has been very unfavourable. And look at the European Parliament elections – in Europe all the parties that appear to be strongly opposed to the existence of the [EU] received the strongest support to get representation in the European Parliament. What an irony!

I think Europe needs Turkey, no question about it. Turkey needs Europe; Europe is a set of references that we still need, so we're committed, we would still like to join the EU, and be a first-class member. We’re willing to do everything it takes to become an EU member, and we will do that.

But in my view, it doesn't really matter whether we join the EU or not – the journey itself is more relevant for investors. There is progress across the board. If Turkey does what it takes to become an EU member, and if it ends up becoming a Norway or Switzerland, no big deal. You get emerging market growth at developed market risk. Where else would you get such an offer?