Tweet
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.
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.