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ANKARA: Council Of Europe: Shadow Economy In Turkey Alarming

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  • ANKARA: Council Of Europe: Shadow Economy In Turkey Alarming

    COUNCIL OF EUROPE: SHADOW ECONOMY IN TURKEY ALARMING

    Today's Zaman
    Oct 4 2011
    Turkey

    Mevlut CavuĊ~_oglu, an Antalya deputy from the governing AK Party,
    is the current president of the Parliamentary Assembly of the Council
    of Europe.

    The Parliamentary Assembly of the Council of Europe (PACE) cited
    Turkey, among others, as one of the leading economies with a large,
    informal and therefore untaxed component, saying this alarming
    issue significantly erodes state authority and the capacity for good
    governance that are essential for fostering democracy, development
    and the rule of law.

    According to a report issued by PACE on Tuesday, it is estimated that
    the size of the underground economy in Turkey constitutes 33 percent
    of its gross domestic product (GDP). With one-third of its GDP swamped
    in unregistered economy, Turkey ranks in the middle when compared with
    the Baltic states, which have around 40 percent of their GDP coming
    from underground economies, and the South Caucasus countries, which
    have over 60 percent of their economies underground, and countries
    like Austria and Switzerland that have less than 10 percent of their
    GDP coming from underground economy.

    Stressing that shadow economies and economic crime deprive state
    budgets of substantial amounts of tax revenue, distort competition
    in regular markets, flout citizens' socio-economic rights, slow
    down economic progress, abuse public welfare systems and propagate
    lawlessness, the PACE report argued that member states should focus
    on resolving problems in laws, rules and regulations as well as
    shortcomings in law enforcement. "Such problems include loopholes,
    red tape, excessive regulation or tax burden and a lack of effective
    oversight and control," it stated.

    PACE urged member states to act on this growing problem, saying
    evaluation measures, regulatory adjustments, electronic surveillance
    of money flows, use of economic intelligence to exchange information,
    whistle-blowing and witness protection should be employed by member
    states. Among Turkey's western-border neighbors, only Bulgaria exceeded
    Turkey's unregistered economy at 37 percent, while the Greek shadow
    economy was estimated to be around 25 percent.

    The report called on member states to review the weight of their
    regulatory systems related to taxation, licensing, labor, environment,
    health and safety, consumer protection and intellectual and industrial
    property rights in order to determine whether the cost of compliance
    might be encouraging the unregistered economy. These regulations
    might be streamlined and the cost of compliance might be lowered,
    the report argued. It also asks member states to study the impact of
    migrant workers and low-cost labor on the social security systems of
    the countries.

    According to PACE, electronic monitoring and active surveillance of
    money flows by banks and financial institutions must be accompanied by
    a tightening of the rules regarding the use of cash transactions and
    increased penalties for unrecorded or undeclared cash receipts. The
    report recommends that 47 member states improve their liaisons,
    information exchange, sharing of better practices and cooperation
    between monitoring, investigating and prosecuting bodies at local,
    regional, national and international levels.

    The Council of Europe called on member states to sign, ratify and
    implement a number of conventions to combat unregistered economies.

    Among these is the Convention on Laundering, Search, Seizure and
    Confiscation of the Proceeds from Crime and on the Financing of
    Terrorism, which Turkey signed in March 2007 but has not yet ratified.

    The report also underlined that there is a link between the size of
    unregistered economies and how countries ranked in the Transparency
    International Corruption Perception Index. It stated that it is not
    surprising some member states also scored very high on the index, for
    which higher scores represent less transparency: Turkey ranked 56th
    on last year's list among 178 countries, while Russia placed 154th,
    Azerbaijan and Ukraine ranked 134th, Armenia was 123rd and Moldova
    ranked 105th.

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