System of finance in turkey

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  • 1. VAT as the main turnover tax is part of thefundamental criteria for full EU membership andTurkey replaced the existing production tax with VAT (KDV) in 1985. The rise in the rates and changes in the structures of Turkish VAT as aresult of fiscal approximation clearly have major economic effects on the Turkish economy. The percent of VAT charged is different on everysubject. A Tax refund is applicable for short-term visits.
  • 2. OTHER TAXES TO BE PAİD İNCLUDE: CAR TAX (TAŞIT VERGİSİ) PAİD İN TWO İNSTALLMENTS: JANUARY AND JULY.PROPERTY TAX (EMLAK VERGİSİ) SHOULD BE PAİD İN TWO İNSTALLMENTS: MAY AND NOVEMBER.
  • 3. Currently the financial sector in Turkey comprises 77 banks, six special finance houses and a large number of brokers and foreign exchange offices. However, the financial system is dominated by the banks, which have a nationwide branch network. Financial market reforms introduced in the early1980s have led to diversification of financial activities. Before the reforms, banking in the country was tightly regulated. The entry of new banks was restricted and interest rates were controlled.
  • 4. Banks were not permitted to engage in activities such asmerchant banking, investment banking and brokerage. Banks are now allowed to engage in such activities as securities underwriting and trading, establishing and managing mutual funds and securities custodian services.Public banks and major private banks continue to have a significant share of banking business, butwith the deregulation of banking activities a number of new entrants have started operations. Increased competition in the financial sector has resulted in the development of new products and services. These developments have been particularly significant in payment services.
  • 5. In less than a decade there has been rapid growth in new payment-related services such as ACHpayments, card payments, ATMs, POS networks, S.W.I.F.T. and the national RTGS system. The growth and spread of these services hasbeen unexpectedly high, reflecting a high degree of public acceptance of these products aspotential replacements for cash-based payments.
  • 6. Special finance houses (SFHs) operate pursuant to the Special Finance Houses Decree (No. 83/7506).Similar to commercial banks, they can collect deposits in Turkish liras and in foreign currency. However, they operate on profit/loss sharing principles and do not pay interest on deposits. The SFHs and their customers determine the profit/loss sharing conditions. They participate in clearing and settlement in the same manner as other banks.Currently, there are six special finance houses in Turkey and their share in the total financial system is around 2%.
  • 7. The Treasury, banks, financial institutions (SFHs, exchange offices), public entities (state-owned economic enterprises, ministries) and internationalorganisations (IMF, World Bank, Asian Development Bank) hold accounts with the CBT. Accounts do notbear interest, and are used for funds transfers between the account holders as well as for settlement of obligations arising from interbank clearing systems. Banks hold giro accounts, reserve requirement accounts and TIC-RTGS accounts.
  • 8. Giro accounts are mostly used for cash withdrawal and for interbank transfers in the event of a technical problem with the RTGS system. The funds maintained in giro accounts are usually a smallportion of the total bank funds deposited with the CBT. A separate account, the TIC-RTGS account, is used for payments routed through TIC-RTGS. Banks’ reserve requirements accounts are separate fromsettlement accounts, although funds may be transferred between different accounts whenever required.Accounts are decentralised and the account holders may have accounts with more than one branch of the CBT. These accounts are controlled exclusively by their holders and debits from them may be made only on the holders’ instructions.