Potential of tax incentives to atract foreign direct investment towards Turkey

One of the external financing sources of economic growth and development, perhaps the most important, is directly foreign capital investments. Directly foreign capital investments not only bring currency to the country but also increase national income and employment, technology level, exports and tax revenues. In addition, these invesments contribute to decrease in current account deficit. Because of these contributions, countries apply various incentive policies to attract foreign capital investments to their own countries. One of these incentive policies is the taxational incentives. Taxational incentives inclued low rate of income and corporation tax, transfer of previous year losses to the subsequent periods, tax holiday, tax credit, investment tax credits, accelerated depreciation, tax havens, tax deductions on special expenditures, discount of social insurance payments, customs duty refund and customs duty exemption, tax incentives for export-oriented investments and taxational incentives provided to free areas. However, various taxational incentives policies have been implemented in Turkey for many years. In this study, taxational incentives applied to directly foreign capitals are tackled and the potential of attracting foreign capital is discussed. In Turkey, customs duty exemption, value-added tax exception and value-added tax refund, withholding of income tax support, tax reduction, interest support, employer's national insurance support, R&D support, support for technology development areas and the other tax incentives are applied as taxational incentives. Tax incentives are implemented in Turkey, were not effective alone in attracting foreign direct investments has been concluded in this study. Due to investments in Turkey is shaped by further the economic conjuncture, priority should be given to economic reform. If incentive policies are prepared within the framework of a strong economic structure, a stronger ground for directly foreign capital inflow can be created.