Taxation of financial instruments in Turkey

ABSTRACT The content of financial markets, their kinds, characteristics, operation of financial system, and the taxation of financial markets are complicated in Turkey, the positions of financial organizations in a financial system and their individual characteristics are explained and their taxation process is described in this thesis by using tables and graphs. Financial institutions and their place in financial system are explained. Financial institution are considered as direct tax payers. Also investment funds, investment trust, individual retirement funds and insurance companies, from this point of view, are discussed. This is how the financial system operates; The ones who make the financial transaction are subjected to taxation The tax load imposed on the financial earnings acquired by means of the financial instruments may either encourage or deter the persons who both demand and supply such financial instruments. In this thesis, compared to the banking sector financial investment market is not yet developed because of tax and interventing party costs and other complex issues. Other dilemna can be named as transperancy, market discipline, company and investor know-how that can be solved in the long run. In Turkey, as of now, investors that come to Stock Exchange Bureau have no purpose of becoming a partner or receiving dividends of that company. Furthermore, companies in Stock Exchange Bureau have no intention to create an atmosphere for them. So it should not be expected for Stock Market to grove and improve only bu speculative trade of shares. On the other hand, it is vitally important to collect taxes from income and gains that are obtained from financial instruments of national and international flow of funds. That is why in Turkey, many exemptions are applied to tax collection. Besides not having enough savings and not using them effectively in productive areas budget deficit are inevitable. In Turkey, due to the administrative, legal, political and economic risks, the issue of taxation of financial income and gains is highly important. In contrast, in recent years, implemented structural reforms and regulations to join into the European Union have caused serious expectations on reducing these risks. Insufficient accumulation of capital, undeepened financial markets and weak financial instruments. Increases of tax load collected from properties and services ruins the price mechanism Thus, altough there are increasing indirect tax rates, it has never been possible to collect more tax in totals just because of tax base narrowed. This is why the conclusion ve attained from the regression formula certififes the interpretation of this thesis. vx