Substantial regulations have been published in the Official Gazette dated 25.10.2016 and numbered 29868, which amends in the examination procedures in regards to the procedures and principles of tax auditing.

According to the new regulations (but not limited to):

  • a summary of the report that consists criticized issues of taxpayer before the Report

Evaluation Commission is to be provided;

  • under no circumstances, any written document and/or information in regard to any subject despite the examination period and subject - matter may be upon demanded from the taxpayer;
  • drafts of analysis report shall be given to the taxpayer on request two days in advance;

criminal conducts that were noticed by tax inspectors in spite of their duties can only be notified to related competend body by the way of Presidency of Tax Inspection Board.

1- Regulation on the Amendment of the Regulation on the Procedures and Principles to be complied in Tax Audits

In accordance with the relevant regulation the third paragraph af Article 6 of the Regulation has been amended as follows:

Tax auditing may only accur within the limits of examination period and subject as stated by the assignment letter for tax auditing.

Under no circumstances, any written document and/or information in regard to any subject despite the examination period and subject - matter may be upon demanded from the taxpayer. When criticism is required on subjects ascertained on a different examination period or subject than stated in the assignment letter of tax auditing during the examination, this case should be notified to the competent body of assigned task.

Before the Amendment of the Regulation, there have been two types of tax audit: Thorough examination and limited examination. Thorough examination consists the tax bases of tax audit for one or more tax on one or more tax period of all types of business and transactions of a taxpayer. Limited examination is the type of tax auditing concentrates a specific subject excluding thorough examination.

In regard to the Amendment of the Regulation the two types of tax auditing mentioned above shall no longer exist and will mend into one. With the Amendment various problems will arise. Prior to the Amendment, through the instrument of thorough examination, the ascertainment of tax evasion was frequent and easy, however, with limited examination it will be almost impossible to maintain the order. It would pave the way for tax evasion through limited exam- ination.

2- Regulation on the Amendment of the Regulation on the Tax Inspection Board

It has been clearly stated that the investigations made by the Tax Inspection Board gained administrative status along with the Amendment. Prior to the Amendment, the criminal con- ducts that were committed by officials which were noticed by tax inspectors within the frames of Codes of “Declaration of Wealth’’, “Prevention of Bribery and Corruption’’ and “Trial of Offi- cials’’ had the right to apply personally to the competent bodies.

Prior to the Amendment, investigation reports on officials and other public officials were referred directly to public prosecutor. Henceforth, report of investigation shall be referred to the Board in order to be transmitted to the public prosecutor. However, according to the Regu- lations, all kinds of criminal conducts that were noticed by tax inspectors in spite of their duties can only be notified to relevant competent body by the way of Presidency of Tax Inspec- tion Board.

Prior to the Regulation, tax inspectors had more impact over taxpayers by tax inspectors. Even though the criminal conducts, which could be reported, were restricted, tax inspectors had the right to notify the said criminal conducts directly to the public prosecutor, which gave them a rightful sense of superiority and authority over the taxpayers that committed felony. The sharp sword of Themis was easy and inevitable to sense. However according to the Regulation of Amendment, it is sad to state that the taxpayers who committed felony are almost in a by government protected haze. It may not known if the said tax inspection report would be deliv- ered to the related competent bodies or which reports of the whole will be conveyed and which fundamental principles will be followed when evaluating the said report. These are important and sadly dangerous questions that show us the legal gap brought by the Amendment.

According to the Amendments on the Regulations, when the tax technical report of a taxpayer was arranged in concern with an act of forgery of documents consists such acts of another taxpayer, it would not be attached to the tax technical report in terms of the taxpayer.

With the above stated changes, there will be severe consequences, which could not be elimi- nated easily. It is regulated that when an act of forgery of documents, which committed by a taxpayer other than the one who is the subject of the tax technical report, came to attention by a tax inspector, a connection which is vital for the general principles of law and of tax law can not to be established because the said regulation restricts a connection to be established formally. In regard of the Regulation it is asked from the tax inspectors that the disclosure of an act of forgery of documents is to be disregarded with the said Regulation.

3- Amendment of the Regulation on the Establishment of Report Evaluation Commissions and the Working Procedures and Principles

According to the Regulations, taxpayers or tax inspectors may be heard by Commissions if it seems necessary or upon request. With the Amendment, a summary of the reports shall be provided to the taxpayer before the hearing due to the matters, which were established a presence in the reports.

Even though the Big Four have considered that it should have a positive impact on the tax system, it would be wise to consider the fact that regulations bring restrictions. Prior to the Amendment on the Regulations, whole report has been provided to the taxpayer if it is requested. Yet in regard to the Regulation, only a summary of the said report shall be available to the taxpayer. In the Regulation, the ‘’summary’’ of the report was not detailed. It is not stated clearly which parts of the report should the summary contain nor the fundamentals were designated. The summary is solely under the initiative of tax assessors and that is an area, which is open to misuse. It remains to be seen, how the three Amendments will have an effect on the tax-system.