Englısh Translatıon
Çev. Burcu Sipahioğlu - Duygu Öztürk
ANNULMENT OF THE PROVISION CONCERNING THE CALCULATION OF THE PENALTY FOR THE LOSS OF TAX BY THE
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Today, although the concept of the state of law is perceived to be the protection of the persons’ rights against the activities of the executive authority and the subjectivity of any actions and activities of the administration to maintain this protection to the judicial review; the concept at issue actually consists of another important protection method. This method is related to the protection of the persons’ rights against the legislative body. With the realization of such a necessity, the conformity of the laws passed by the parliaments formed by the representatives of the public as from 18th century with the Constitutions by which personal rights are guaranteed have gained importance and auditing the constitutionality of the legislative activities has emerged as a concept.
In our legal system it has been adopted that while any acts and activities of the administration shall be subjected to judicial review, conformity of the laws passed in the Turkish Grand National Assembly with the Constitution shall be controlled by the
In our Constitution, after the control mechanisms, the detailed provisions concerning the features and consequences of the decision made by the
As an instance of the compliance audit of the Laws in terms of the Constitution, a decision of the
The Constitutional Court deemed proper the Ordu Tax Court’s request of annulment of the part of the clause 2 of the Article 344 of the Tax Procedures Code that “…this fine is found by adding to one hundred percent of the loss of tax fifty percent of the default fine calculated based on the amount of the loss of tax pursuant to Article 112 of this law for the period starting from the normal period of payment until the date of issue of the notice served for the fine,” claiming that it is contrary to the Articles 2, 7, 10, 11, 38 and 73 of the Constitution and annulled the provision mentioned to take effect six months after the date of 20.10.2005 when the annulment decision was published in the Official Gazette.
As it can be understood from the statements above, the provision annulled by the Supreme Court is the calculation method of this fine, not the application of loss of tax. To render it more clearly, the
As it could be remembered, with the Law with No. 4369 passed in 1998 radical changes were introduced in the related provisions of the Tax Procedures Code concerning tax penalties and faults, gross faults and evasion fines applied of those causing loss of tax and determined on the basis of the tax amount lost up until that time were combined under the name of loss of tax in the Article 344 of the Law. In the Article mentioned, while it was concluded that fine of loss of tax would be imposed on loss of tax offences, in the Article 341 of the same Law, offence of loss of tax was defined as the situation the tax to be paid could not be accrued in time or accrued deficiently. In Article 344 it was decided that the fine amount of loss of tax would be found by adding to one hundred percent of the loss of tax fifty percent of the default fine calculated based on the amount of the loss of tax pursuant to Article 112 of this law for the period starting from the normal period of payment until the date of issue of the notice served for the fine.
The Constitutional Court based its decision of annulment on the grounds that “in the formula foreseen for the determination of the fine amount of loss of tax, the deferred tax used referring to the Article 112 of the same Law and the Article 51 of the Law on the Collection Procedure of the Public Receivables is a rate determined by the Council of Ministers and the date when the deferred interest rate to be taken as the basis in calculation of the fine to be added to one hundred percent of the loss of tax shall be determined by the Council of Ministers is not known and this situation shall lead to an ambiguity in the fine amount to be foreseen in the end and this is contrary to the provision of the Article 38 that the penalties, and security measures in lieu of penalties, shall be prescribed only by law and also to the principles of state of law in Article 2 of the Constitution.”
In the Article 38 of our Constitution referred to in the grounds of the Court decision, it has been stated that no one shall be punished for any act which does not constitute a criminal offence under the law in force at the time committed and it has been concluded that penalties, and security measures in lieu of penalties, shall be prescribed only by law. This principle called “legality of penalties” is one of the principles that the international law greatly emphasize and this principle is based upon the fact that the persons know the penalty they will be imposed in return for the activities against the law beforehand. The prerequisite of maintaining this with no doubt is that the rules concerning the crimes and penalties are stated in the laws clearly, explicitly and conclusively.
The Supreme Court found the application of the deferred tax rate of which is determined by the Council of Ministers in the calculation of the loss of tax dealt in its decision contrary to the principle of legality of penalties on the grounds that the its date to be determined by the Council of Ministers is not known and thus it results in ambiguity and prevents the persons to know the penalty beforehand; decided to annul the provision. As it can be remembered, deferred interest is an additional payment specified in Article 112 of Tax Procedures Code and calculated at the rate of default fine determined in Article 51 of the Law with No. 6183 for the deferred tax assets not accrued on time. In Article 52 of the Law with No. 6183, the lawmaker determined the default fine rate as 4% for each month severally; however, the Council of Ministers is entitled to decrease the default fine rates down to 10% by months as a group or severally for each month and increase default fine are and its minimum amount by two fold. This situation is found to be contrary to the principle of legality of the penalties by the Supreme Court.
Although the application of the deferred interest in calculation of the penalty of loss of tax has been shown in the reasons for annulment of the court, in order to prevent the possible ambiguities that could emerge, it was deemed appropriate to annul whole provision concerning the calculation method. To put it more clearly, the provision which is annulled is not only the part of “…adding fifty percent of the default fine calculated based on the amount of the loss of tax pursuant to Article 112 of this law for the period starting from the normal period of payment until the date of issue of the notice served for the fine,” but is the whole provision, “…this fine is found by adding to one hundred percent of the loss of tax fifty percent of the default fine calculated based on the amount of the loss of tax pursuant to Article 112 of this law for the period starting from the normal period of payment until the date of issue of the notice served for the fine.” Therefore, on the basis of the court reasons, it is not possible to calculate penalty of loss of tax as a one hundred percent of the loss of tax.
As for the consequences of the annulment decision;
1) Since by annulling the part concerning the calculation method of penalty of loss of tax included in the second clause of Article 344 of Tax Procedures Code that “…this fine is found by adding to one hundred percent of the loss of tax fifty percent of the default fine calculated based on the amount of the loss of tax pursuant to Article 112 of this law for the period starting from the normal period of payment until the date of issue of the notice served for the fine”, although the statement that “a fine shall be imposed on those who commit the act giving rise to loss of tax” remained in the article, State Council also annulled the provision concerning the calculation method of the penalty, and thus made it inapplicable to practice both the penalty of loss of tax and the evasion penalty determined as three fold of the penalty of loss of tax.
2) As it has been stated in the decision of the
3) We should note that the annulment decision of the
However, the collection the fines of loss of tax which are not paid by the taxpayer or the person in charge on the effective date of the annulment decision although has become definite shall not be possible since the provision it is based is annulled. Otherwise, this shall be against the justice and the general principles of the criminal law.
4) As required by the provision of the Article 153 of our Constitution, since the decisions of the Constitutional Court are binding for legislative, executive and judicial bodies, administrative authorities and real and legal persons, the annulment decision in question shall have effect on the court suits to be issued for the operations filing dates of which are not overdue and for the ongoing lawsuits for which a decision has not been taken yet. To put it more clearly, while the administrative courts are taking their decisions, they shall take into account that the provision concerning the penalty of loss of tax has been annulled by the
There are different opinions regarding whether or not the annulment decision shall be taken into consideration in the event that the ongoing lawsuits in the administrative courts are finalized until the date of 20.04.2006 when the annulment decision of the
As it is already known, our tax legislation grants the administration the authority to review the taxpayers’ accounts and operations and assess additional tax for five years beginning as of the beginning of the year. The issues leading to loss of tax determined in these reviews are evaluated according to the provisions in effect as of the date when the activity has emerged by the inspectors and penalized according to the provisions effective on that date. Since the provisions which are one of those mentioned and related to the calculation method of the penalty of loss of tax applied on the taxpayers causing loss of tax are annulled by the Constitutional Court, in the tax inspections concerning the previous periods, penalty of loss of tax and evasion penalty calculated on the basis of this penalty amount shall not be applied.
In summary, since the provision concerning the calculation method of the penalty of loss of tax has been annulled by the Constitutional Court, penalty of loss of tax shall not be applied for the offences loss of tax which are included in the period from the date when the provision is introduced in the law to the effective date of the annulment decision and committed within the fiscal period statutory period of limitation of which is not overdue although it has been determined by the inspectors.
NEW INVENTORY STANDARD IN NEW YEAR
Turkish Accounting Standards Board published the Communiqué with No 3 on the Accounting Standard concerning Inventories with No 2 to take effect in the accounting periods beginning as of 31.12.2005 with a view to maintain unity of application in accounting operations concerning inventories and to illuminate confusing issues.
In the Communiqué mentioned particularly two definitions stand in the front: Net Realizable Value and Original Purchase Value.
Net realizable value is the amount emerging after the total of estimated completion cost and estimated sale expenses required for sale is deducted from estimated sale costs in the normal flow of business.
Original purchase value is the amount expected to emerge in the event that an asset changes hands between the informed and willing groups in the mutual bargaining environment or a debt is paid.
Another important issue mentioned in the Communiqué is related to the appreciation of inventories. Inventories shall be appraised by the lower one between the cost and net realizable value.
In Article 10 of the Communiqué the scope of the inventory costs is specified. Inventory costs include all purchase costs, conversion costs and other costs incurred to establish the current state and status of the inventories. Since purchase cost is clear, it is worth describing the conversion costs. Conversion costs of inventories consists amounts distributed systematically from the fixed and variable general production expenses incurred in the conversion of costs directly related to production and inventories to finished goods just as the direct labor costs. Distribution of the fixed general production expenses over the conversion costs is based on the assumption that the production costs shall be in their normal capacities. In case of idle capacity or low capacity, undistributed general production expenses are recorded expense in the financial statements of the related period. Thus unit costs are prevented to increase nominally higher. Variable production expenses are allocated to production units in proportion to their share of use.
Examples for the expenses which are excluded in costs of inventories and considered as expenses of the period they emerged are presented below:
a) Costs of first goods and materials (waste and losses), labor and other costs realizing higher than the normal
b) Storage expenses other than the obligatory for the next production stage
c) General administration expenses which have not contributed in the formation of the current state and status of the inventories and
d) Purchase expenses.
Techniques related to Cost Measurement
In the enterprises where flow of production and distribution is not complicated, standard cost method may be used in the measurement of inventory cost. In the calculation of standard cost, usual levels of the use of first goods and materials, labor, efficiency and capacity are taken into consideration. Standard costs are reviewed regularly and if necessary restated in accordance with the present conditions.
Retail method is used by the enterprises rendering retail purchases in the appreciation of the inventories with similar profit margins and numerous items rapidly changing where it is not practical to use other cost methods. In this method, costs of inventories are calculated through deducting an appropriate gross profit margin from purchase value of the inventories. In the determination of the percentage rate to be used, the inventories priced below the real purchase price are taken into consideration. Mostly, for each retail purchase portion, an average percentage is used.
Calculation Methods of Inventory Costs
Special cost method, which is also called “real consignment cost method”, is used in the production facilities where determination of the inventories which cannot be substituted for one another and of the product cost for each consignment is more practical and beneficial. In this method, it is necessary that the cost can be determined for each inventory item.
Costs of the inventories except those specified above is determined using the methods (formulas) of either first in first out (FİFO) or weighted average method. An enterprise employs the same cost calculation method for all the inventories with similar features and uses. Different cost calculation methods may be used for the inventories different in terms of kind and area of use.
Recording the Inventory Costs as Expense
Inventory costs may be recorded as expense only after the inventories are sold and the earning is transferred to the financial statements. Provisions of inventory value decrease reducing the inventories to their net realizable values and losses concerning the inventories can be recorded in the entries as expense in the period when reduction and losses emerge.
The inventories used for the assets produced and built to be used in the enterprises are converted to expense in the service period of the assets after they are added to the costs of these assets.
Conclusion
The main purpose of all these arrangements, as stated in the Communiqué mentioned, is to provide the domestic enterprises with an accounting system and balance that can be compared internationally and thus to attract foreign investment to our country.
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