Turkey has emerged as a rising investment hub in recent years. Particularly, the Istanbul Finance Center (IFC) stands out with its innovative infrastructure and attractive incentive packages, drawing both local and international investors. IFC is on its way to becoming a center of attraction not only for the financial sector but also for tech and innovation-focused entrepreneurs. These developments reflect the broader framework of investment incentives in Turkey, which aim to enhance the country’s competitiveness in the global economy.
Why Is It Necessary ?
Reflecting Fair Value: Inflation accounting considers changes in monetary value over time, ensuring financial statements provide a more accurate representation.
Improved Decision-Making: Accurate and up-to-date financial information supports better decision-making by managers and investors.
Risk Management: Financial reports that disregard the effects of inflation can misrepresent a company’s financial health, leading to errors in risk assessments.
Why It Should Not Be Taxed
Lack of Real Gains: Positive differences arising from inflation adjustments often reflect nominal increases rather than genuine economic gains.
Encouraging Investment: Exempting inflation-adjusted figures from taxation frees up resources for companies to reinvest and grow.
Financial Stability: Taxing the positive differences resulting from inflation adjustments could undermine a company’s financial structure, adversely affecting financial stability.
This approach provides a fairer and more sustainable framework for financial reporting. However, Turkey’s tax policies must be reconsidered based on consistency and fairness. Frequent tax amnesties—on average every two to two and a half years—are addressed on the same level as the taxation of positive differences from inflation accounting. This scenario could present a final tipping point, particularly for foreign investors, as it may significantly increase financial burdens.