The Turkish Parliament has removed provisions taxing cryptocurrencies from a massive draft law designed to regulate a range of matters related to tax collection and government spending.
The texts, which proved controversial because they envisaged a tax on all transactions through cryptocurrency platforms, were withdrawn after strong opposition from opposition lawmakers and stakeholders.
Cryptocurrency tax provisions have been dropped from Turkish law
Members of the Turkish Legislative Council have withdrawn provisions aimed at taxing cryptocurrency transactions after talks between the parliamentary majority and other factions.
The articles were part of a comprehensive draft law covering not only tax policy, but also other economic systems and defense spending, the English version of Hurriyet Daily News revealed on Saturday.
The report explained that a last-minute agreement to delete it was reached before an official meeting chaired by the Vice-President of the Grand National Assembly, Jalal Adan.
These provisions would have imposed a 0.3% transaction tax on sales and transfers of digital assets processed by cryptocurrency service providers in Türkiye, which are collected and paid to the state every month.
They also introduced taxes on profits associated with cryptocurrencies, obligating brokers to withhold 10% of capital gains to their clients on a quarterly basis. I mentioned By Cryptopolitan earlier in March.
The provisions, which were strongly criticized by the opposition, were added to the comprehensive draft law by the ruling Justice and Development Party.
While the proposals have now been removed, their representatives have indicated they may submit a revised draft as part of a separate legislative initiative.
The government in Ankara still hopes to benefit from the massive financial flows generated by the country’s growing cryptocurrency sector.
The Turkish cryptocurrency market has expanded significantly over the past few years, and has been characterized by a high inflation rate in the national currency, the lira.
Türkiye wanted to impose taxes even on cryptocurrency withdrawals
By all indications, the Turkish Tax Authority has played a leading role in drafting the controversial legislation whereby crypto assets are mainly treated from its own perspective.
This led to two main issues, according to Ussal Sahbaz, managing partner at Ussal Consultancy & MnP Istanbul Hub, who I took to X To explain carefully.
The first stems from the intention to apply the proposed transaction tax to all transfers via service providers, including those made to self-custodial wallets, he noted and explained:
“In practice, this is equivalent to imposing a tax on cash withdrawals from a bank. Globally, this type of approach is extremely rare – reportedly only seen in Kenya.”
Sahbaz, whose efforts focus on bridging the gap between business and politics in Türkiye, noted that imposing a withholding tax on crypto income creates another problem.
“For an asset class with near-zero navigation costs, this is likely to push users towards offshore platforms where taxes depend on advertising,” the expert warned.
He stated that similar developments have already been observed in India and South Korea, “both of which are now trying to correct unintended capital outflows.”
In the case of cryptocurrencies, the Turkish analyst specializing in emerging markets added, “Poorly designed taxes do not increase revenues, but rather shift the tax base elsewhere.”
Usal Sahbaz pointed out that the draft law proposed by the government quickly passed through the parliamentary committees, which approved it without much consultation with the parties concerned.
Its cryptocurrency provisions were only withdrawn at the last minute, thanks to the active efforts of a small group of lawmakers and under pressure from stakeholders.
The remainder of the broad bill still contains other important financial measures, as Hurriyet Newspaper highlighted in its report.
For example, the government imposes a 20% “special consumption tax” on diamonds, pearls, and other gemstones, including products made from them.
Gambling and gambling companies are also prohibited in Türkiye Bet The industry is able to deduct advertising expenses from its taxable income.
