The council recently prepared an evaluation and research paper, which also assessed real estate income, within the framework of the new income tax code draft works. According to this paper, released yesterday, informality is very high in the real estate sector. “The problem is mainly from informality in renting and sales. For a proper real estate inventory list, the tax database in the municipalities can be used,” said the report, which also warned that this would be useless in İstanbul where about 52 percent of the houses are illegal. The other assessments and results are as follows:
* The property valuation method has to be changed as it currently has some problems.
* For the houses being rented, information can be gathered from mukhtars (head of the smallest local administrative unit). The rental fees cannot be determined by this method, just those houses being rented.
* High tax rates, low profit margins and the long depreciation periods, re-taxation of after-tax earnings and shanty houses (gecekondu) -- which are estimated to be 80 percent of all the buildings in the country -- are among the major factors contributing to the unrecorded economy in the sector.
* It may be possible to diminish the unrecorded economy by using the psychological effect of requiring the signature of a third person for rent contracts.
* A fixed-rate taxation may be taken into consideration by removing all discounts and dispensations. By discriminating between commercial buildings and houses, a 10 or 15 percent tax rate may be adopted.
* There is $5 billion vying to come to Turkey, but the failure to secure sufficient land is adversely affecting the inflow of these funds.
* It must be kept in mind that dirty money is usually laundered through real estate purchases.
* At least 4,000 evaluation specialists will be needed as a prerequisite of the mortgage law. Yet existing evaluation offices are not able to grow thanks to low market prices. These offices must be urged to expand by providing incentives.
* Taxes and duties should be simplified.
Source: Today's Zaman 25/09/07
