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International Treaty between US and Turkey

Introduction

In a 2006 testimony of before a U.S. Senate Committee, Patricia A. Brown, former International Tax Counsel to the Treasury Department reinforced the importance of the wide-ranging plan to revise and conclude tax treaties or protocols that would accordingly provide a grater economic benefit to the United States and to U.S. taxpayers. (Taxation Agreement with Turkey) The recent treaties and protocols concluded with the UK, Australia, Japan, Netherlands, Denmark, Germany, Sweden, and others are a good reflection of such an effort designed to reinforce the competitiveness of U.S. multinationals in the international arena.

After a decade where the U.S. Treasury Department has revamped key treaties of its treaty network, it was therefore expected that the newly released 2006 update to the U.S. Model and Model Technical Explanation would take into account some of the tax treaty policies entrenched on those recently concluded treaties. That was the case in some instances, but surprisingly so some of the novelties were simply left out.

US tax law, administration, and policies are essential elements in public finance. In Turkey, the production of revenues through taxation is the principal means of financing government activities. Even governments that borrow substantially to cover budgetary deficits are required in the long run to find revenues to service such debt. Legislators and officials have devised many forms of taxation that are in use in the United States and other countries. They include income taxes, wealth transfer taxes, consumption taxes, property taxes, import duties, excise taxes, and transfer taxes and fees. The decision as to which devices to use depend on several basic factors:

the financial needs of the government,

the sectors of the economy intended to bear the burden, or incidence, of the tax,

the possibility of using tax law and policy to advance government objectives beyond the financing of public costs, and

the legal and administrative structure of the country.

The economic and political considerations leading governments to select one or more of these forms of revenue are treated in other entries. Here the concern is to examine the principal doctrinal issues arising with respect to income taxes and wealth transfer taxes, two of the principal federal taxes imposed at the national level in the United States. In addition, issues relating to consumption taxes are discussed because of the widespread advocacy of a national consumption tax as an alternative to the federal income tax.

Income Taxes Generally

Individual Income Taxes

Most countries impose some form of individual income tax. Such taxes are justified in part as a means of allocating the burdens of government in ways that reflect the citizen's ability to pay and, some argue, that put a heavier burden on those who most benefit from the stability afforded by effective government. While perhaps serving in this respect as a surrogate for a wealth tax, which would more directly allocate tax burdens according to the ability to pay, an income tax in general avoids the burden of continually determining the value of a taxpayer's property interests.

Some have proposed a “true” ...