Turkish “crypto expansion” was a big surprise for many people. In a matter of days, they became one of the “Alpha wolves” in a crypto financial food chain. The reason behind it is simple - Lira, Turkish national currency, lost a good percent of its exchange value. As a result - people were desperate to find a way to save their money and some of them, including businesses, decided to try their luck with the nascent industry, or simply put - crypto. Naturally, this led to the point where local authorities were forced to look at the subject of digital assets.
Their answers will be paramount to all aspects of the future digital economy ecosystem development in the country. To get a clear picture where Turkey is going in the world of the post-industrial world economy, Bitnewstoday talked with Yücel Kamar, the economics professor from the Istinye University, located at Istanbul.
Bitnewstoday.com: Well, first thing first - Does Turkey have a crypto business tax already?
Yücel Kamar: Crypto business (any financial institution and coins) has not been regulated by the Turkish Government yet. According to taxation laws in Turkey, in order to levy a tax on a thing, this “thing” should first be defined as a concept. To make such thing a legal regulation, the Turkish Government should decide how to approach to crypto business. For example, there was a debate among legal authorities in recent months over the definition of BTC.
It is not precise in Turkey for the moment whether BTC will be accepted as a commodity, as a financial instrument (securities) or as a virtual money. The Central Bank of Turkey (CBT) tends not to accept BTC and other ones as virtual/digital money due to digital coins are not issued based on a physical value/entity and not supported by the central bank of any government.
The Banking Regulation and Supervision Agency of Turkey (BRSAT) tends not to accept BTC and others as electronic Money. (i.e., e-money)
Q: It might seem that coins don’t bear a value for the Turkish government...
A: Well, of course, digital coins bear a value. But the core debate is what we mean by this “value” concept. Or what is the type of value that digital coins bear? This is a very big theoretical and, maybe, a philosophical question. Are digital coins Money, a financial instrument or a commodity? First of all, we have to find an answer to this big question. In Economics, in order to accept something as Money, this thing should bear the following four characteristics:
• Being a medium of transaction
• Being a measurement of value
• Being a medium of investment and savings
• Being supported by a governmental power (This last one is the case what we economists apply to “Fiat Money”). Digital coins only seems to be a medium of investment at the moment. That’s why they can not be named as “Money,” but this paradigm could certainly be changed in the near future. At the time being in my opinion, it is likely to accept digital coins as “commodity,” rather than other ones.
Q: Well, there are other ways to make crypto legit, maybe the Turkish government sees crypto as securities?
A: The Capital Markets Board of Turkey (CMBT) tends not to accept cryptos as securities. Because cryptos do not correspond to “securities definition” made by CMBT. In Turkey, it seems more likely for BTC and other coins to be accepted as “commodity”. Once “the type of the existence” of coins and crypto business has been decided, I think, the taxation of them will be on the agenda of the Turkish Government because taxation type will be varied according to the definition. If BTC (and others as well) is accepted as a commodity, Turkish Treasury may levy an income tax and value-added tax on earnings from virtual/digital coins.
As you may know, G20 countries, including Turkey, have recently signed a declaration in Argentina aiming to establish an international (rather than a national) taxation system until 2020 for BTC and other coins. And, it seems that this theme will intensively be argued at the next G20 conference in Japan in 2019.
Q: Do you think this new tax system is fair?
A: Well, I’m not a tax expert and taxes are not my specialisation, but as an economist, I can say that any tax system of any nation in the World should surely be designed and projected in a righteous way. I mean, every taxpayer should burden a tax amount that he or she could afford, not more.
Q: Well, speaking about the righteousness, we know that in Islamic world economic relations are largely regulated by ethics. Is it going to be fair from that point?
A: I think it cannot purely be said that all Islamic taxes are for only poor and not with the state. Yes, Islam considers poor people very much and aims to establish a general standard of living at a maximum welfare level for every person.
The Prophet says: “The are more than zakah at your goods and welfare”. And ancient Muslim scholars had interpreted this hadith as that the state is permitted to levy a tax if required, other than zakah (zakat) or almsgiving. Here, the core issue is the level, amount or the ratio of taxes. Islamic Shari'a accepts that taxes would be fair and not be tyranny for all people (i.e., Taxes should not make rich get richer, and poor get poorer).
Q: But how is this going to affect the Islamic market in the long run?
A: It is a big deal in Islamic finance and economics to initiate new economic institutions, due to some religious restrictions. I can say that in the near future Islamic insurance (Takaful), microfinance and Islamic fintechs will attract more attention. And also, we may be introduced with a newly developing term “Islamic techfins”.