Turkey cracks down on tax dodgers with new e-gov system

The Turkish Ministry of Finance has announced a $64m deal with Siemens Business Services to augment the country's burgeoning e-government system.

The VEDOP-2 project will focus on the General Directorate of Revenues, which oversees tax collection, and should be completed by the summer of 2005.

The government aims not only to improve its efficiency in processing transactions and to allow tax payers the convenience of filing returns online but also to increase revenues by cracking down on Turkey's 'informal' economy, or black market.

Osman Arioglu, general manager of the Turkish Ministry of Finance, said: "The most important [part of the project] to us" is the development of a data warehouse for all tax information.

The government hopes the data warehouse will aid in exposing unregistered transactions, ease the investigation of suspicious activities and the enforcement of penalties and build public trust in the tax-collecting system.

Arioglu said: "We believe a more efficient system means more people will comply [with tax laws]... If the people know the informal economy is collapsing, they will feel more confident in the political and economic systems. The new technology will help combat the informal economy."

Turkey's black market is estimated to make up as much as one-third of the country's economy.

Mustafa Cagan, country manager for Siemens Business Services Turkey, said the new automated tax system will increase tax income "rapidly", though the government says it does not have specific revenue growth targets.

As part of VEDOP-2, Siemens will set up a backup and disaster recovery system; implement the technology for a call centre that tax payers can call for information; integrate all tax offices with the Turkish communications network, GELNET; build an infrastructure for data exchange with other institutions; and unify the Tax ID and Citizen ID number systems for better tracking of individuals' actions.

In addition, Siemens will teach around 15,000 Turkish government employees to use the new system and train them in basic word processing, which Arioglu said will "help Turkey's transition to an information society".

Electronic signatures will play a role in the e-government scheme as well. Siemens will provide hardware and software for the technology, while a law allowing the use of e-signatures is progressing through in the Turkish Parliament. It is expected that by January 2005, digital signatures will have the same legal meaning as handwritten signatures.

Security on the e-government system will be ensured through public key encrypted data (including encrypted digital signatures) and password protection.

The benefit to Turkish citizens is that online filing means they no longer need to visit the tax office in person each month. Because salaried workers don't file tax returns, online filing will affect most directly the three million people who account for the 75 million transactions processed by the office each year. Still, the new system will include the filing of vehicle taxes, which affects a large portion of the population.

Turkey lags most European nations and the US in providing online government services.

When asked why the country is behind, Siemens' Cagan pointed to Turkey's recent economic instability, including significant debt and negative GDP growth in 2001 and 1999.

Cagen said: "IT comes if you have a stable government and economy. If you have structural problems, IT makes it worse."

Recently, though, Turkey's economy is looking healthier, with positive GDP growth in 2002 and 2003 and falling inflation.

The markets for IT services in general and government IT services in particular are growing at a slow and steady pace, according to IDC.

In Europe, IDC predicts government IT services will grow by 10 per cent to a $7.4m business between 2004 to 2006. By 2006 they will make up 12 per cent of the total European IT services market.

For the overall IT services market, more growth will be seen in Central Europe and Middle Africa (CEMA) than in Western Europe. In CEMA, IDC sees 25 per cent growth from 2004 to 2006, to create a $6.2m business.

In Western Europe, the overall IT services market will increase by 9 per cent to $53m in the next two years, says the market research firm.