The taxation of savings instruments in Turkey's capital market an analysis of taxation

In all developed economies, capital markets make great contributions to economy. Accumulations of savings holders are transferred to economic areas in need of resource via capital market instruments and savings holders obtain income thanks to savings instruments they own. The taxation of income derived from savings instruments in capital market is one of the most sensitive subjects in taxation. On one hand there is an income should be taxed as to basic taxation principles, on the other hand there is a risk for capital being transferred to the abroad due to taxation. On this account, income derived from savings instruments both should be taxed and the tax burden should be low enough to prevent them being transferred abroad. In this work taxation of instruments in Turkey?s capital market is explained within the meaning of present taxation legislation, implementation problems are mentioned and some resolutions are offered. In Turkey, income derived from saving instruments is taxed in the scope of the Income Tax Law (ITL). In ITL, incomes such as interests and dividends of saving instruments are taxed as ?Income from movable property? and the capital gain derived from the exchange of saving instruments is taxed as ?appreciation gain?. Withholding tax implementation has started in Turkey as of 01.01.2006 in the taxation of saving instruments. Although simplicity in taxation of savings instruments is aimed, certain instruments and incomes are taxed 215 according to previous rules because of being uncovered and this case turns out taxation more complex.