The effects of the banking and insurance transactions tax on the Turkish banking sector

All of the countries targeting the strong and lasting economic stability have been working for the effective and advanced banking sector. The banks basic function of which is to mediate between the fund suppliers and demanders are subject to some tax burdens and obligations during these processes.These burdens and obligations on the banking sector prevent the banks banking effectively and prevent the development of the sector. However, the governments, although they take many decisions toward the development of the banking sector, hesitate to give tax incentives under revenue constraints. Especially, having serious budget deficits, Turkey has delayed in taking decisions to this end.Banking and Insurance Transactions Tax (BITT), effectively levied on almost all banking transactions, is the most important tax item to increase the transaction cost in banking operations in Turkey. The banks pay BITT for all the revenues they get from transactions. Although they transfers a large portion of this tax to the customers, these procedures raise transaction costs for banks.In recent years, the removal of BITT or reduction of its rate or the tax exclusion of many transactions is frequently voiced in European Union candidate country Turkey.To bring the tax burden on the banking transactions in Turkey to the EU norms will lead the sector to come to the point that it deserves and to reach a level of the advanced countries.