Dual income tax: A reform option for personal income tax in Turkey

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BUSINESS AND ECONOMIC HORIZONS, vol.3, no.3, pp.47-57, 2010 (ESCI) identifier

  • Publication Type: Article / Article
  • Volume: 3 Issue: 3
  • Publication Date: 2010
  • Doi Number: 10.15208/beh.2010.26
  • Journal Indexes: Emerging Sources Citation Index (ESCI), ABI/INFORM, Business Source Elite, Business Source Premier, CAB Abstracts
  • Page Numbers: pp.47-57
  • Eskisehir Osmangazi University Affiliated: Yes


While several countries attempted to improve their income taxation model by adopting modified versions of DIT, Turkey has not implemented a pure DIT model but abolished the old return system and applied a final withholding tax on capital and interest incomes in 2006. Nonetheless, top marginal tax rate on earned income decreased from 55% in 1998 to 35% in 2010. A similar reduction was also observed with respect to the flat corporate tax rate, which was dropped off from 46% in 2000s to 20% in 2006 and the investment allowance was also abolished in that year. This is the first important step for introduction to pure DIT model, afterwards corporate tax rate should be reduced to 15% percent, which is equal to tax on capital incomes, thus capital incomes should be exempt from corporate income tax rate and the problems of double taxation of distributed dividends then will be solved. From this it may be concluded that the current personal income tax system in Turkey shares several features with the DIT model. The imposition of a pure DIT model in Turkey would improve income taxation and have a positive effect on Turkish economy.