Public Finance in Turkey

ContentsPublic revenues and expenditures to GDP ratioPublic debt and %GDP, date of repaymentStructure of public sector – Central and Local

gov., agenciesBudget revenues and their structure Budget expenditures and their structureTypes of taxes (i.e. real estate tax)Budget processBudget presentation (classification)Current issues in public finance

Short Characteristics of TurkeyPopulation :83,654,256Capital : AnkaraBordered Countries: Bulgaria, Greece,

Georgia, Armenia,Iran, Azerbaijani, Iraq and Syria.Currency : Turkish lira _ tlCentre of Finance : Istanbul

Public ExpendituresPublic expenditure is spending made by the

government of a country on collective needs and wants such as pension, provision and infrastructure.

Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting the acquisition by governments, of goods and services for current use, to directly satisfy the individual or collective needs of the community, is classed as government final consumption expenditure.Intended to create future benefit such as

infrastructure investment research spending

Government spending can be financed by government borrowing or taxes.

2004

2005

2006

2007

2008

2009

2010

Expenditures27

24,3 23,1

23,7 23,9

28,2

25,8

1-Non-interest expenditures 16,9

17,3 17 18 18,6

22,6 21

a-Personnel expenses 4,5 4,5 4,5 4,6 5,1 5,9 5,9

b-State Social Security Institutepremiums

0,6 0,6 0,6 0,6 0,7 0,8 1

c-Purchases of Goods and Service 2,1 2,1 2,2 2,3 2,6 3,1 2,1

d-Current Transfers 7,6 7,9 7,2 8,2 7,4 9,7 9,6

e-Capital Expenditures 1,2 1,3 1,3 1,3 1,9 2,1 1,5

f-Capital Transfers 0,3 0,4 0,6 0,6 0,3 0,5 0,4

g-Lending 0,5 0,5 0,6 0,3 0,5 0,6 0,5

2-Interest Expenditures 10,1 7 6,1 5,8 5,3 5,6 4,9

Public Expenditures to GDP

Public Revenues to GDP

2004 2005 2006 2007 2008 2009 2010

General Budget Revenues 21,6 23,1 22,3 22 21,5 22 22,6

Tax Revenues 18 18,4 18,1 18,1 17,7 18,1 19

Non-Tax Revenue 3,6 4,7 4,2 3,9 3,8 3,9 3,5

 Non-Tax Revenue is the recurring income earned by the government from sources other than taxes. In the broad sense, non-tax revenues are state revenues derived from socialist enterprises.

Examples Include :Received on loands given by the government to other states Revenues from sales state assets (privatization)Revenues from natural resources.

Public Debt to GDP ratio

Public debt TL-denominated and foreign currency

(Million $)

2006 2007 2008 2009 2010 2011

Greece 106,1 107,4 113 129,4 145 165,3

Italy 106,1 103,1 105,7 116 118,6 120,1

Portugal 69,3 68,3 71,6 83,1 93,3 107,8

France 63,7 64,2 68,2 79,2 82,3 85,5

England 43,4 44,4 54,8 69,6 79,6 85,7

Germany

68,1 65,2 66,7 74,4 83 81,2

Spain 39,7 36,3 40,2 53,9 61,2 68,5

Turkey 46,5 39,9 40 46,1 42,4 39,2

Public Debt Resources

Internal – ResourcesCommercial BanksCentral Banks

External – Resources Foreign Countries International Banks (Deutsche Bank,BNP--‐

Paribas) Foreign capital markets International Instutions (IMF)

Public Debt - IMF

Date of repayment(Million $) 2002 2003 2004 2005 2006 2007 2008 2009

Total 129,523

144,092

160,980

169,732

207,593

249,386

277,669

271,140

Short term 16,424 23,013 32,205 38,283 42,616 43,134 50,447 52,030

a. Public sector

915 1,341 1,840 2,133 1,750 2,163 3,248 3,598

b. TCMB 1,655 2,860 3,287 2,763 2,563 2,282 1,874 1,776

c. Private sector

13,854 18,812 27,078 33,387 38,303 38,689 45,325 46,656

Long Term 113,099

121,079

128,775

131,449

164,977

206,252

227,222

219,110

a. Public sector

63,619 69,503 73,828 68,278 69,837 71,361 75,037 79,856

b. TCMB 20,348 21,513 18,123 12,662 13,115 13,519 12,192 11,529

c. Private sector

29,133 30,063 36,824 50,508 82,025 121,371

139,993

127,725

Structure Of Public Sector in TurkeyPublic sector statistics covers the central

government budget institutions, local governments, social security institutions, the general health-care insurance, extra budgetary funds, revolving funds, the Unemployment Insurance Fund and SEEs.

Central Government Local Government Social Security State Economic Enterprises Funding Agencies Other Institutions and Organizations

Local governments balance is composed of special provincial administrations, municipalities, urban based local government unions, utilities of the metropolitan municipalities and İlbank accounts.

  Social security institutions comprise Social Security Institution, Turkish Employment Organization and Unemployment Insurance Fund. Only the investments of Turkish Employment Organization are included into the social security institutions' balance, and the balance of Unemployment Insurance Fund is monitored separately.

The coverage of extra-budgetary funds balance includes; Support and Price Stabilization Fund, Social Aid and Solidarity Incentive Fund, Defense Industry Support Fund, and Privatization Fund.

Functional classification

Share in the Budget

General Public Services 121.215.472 30,0

Defense Services 20.420.041 5,1

Public Order and Security Services 28.750.664 7,1

Economic Affairs and Services 51.189.704 12,7

Environmental protection services 532.440 0,1

Housing and Social Welfare Services 6.244.295 1,5

Health Services 18.043.828 4,5

Recreation, Culture and Religion Services 7.794.772 1,9

Education Services 63.510.828 15,7

Social Security and Social Assistance

86.343.625 21,4

Budget Expenditures Total 404.045.669 100,0

Budget Expenses ( Functional classification)

Budget Revenues(TL) K Distribution

Budget Revenues 389.681.985

General Budget Revenues 375.563.758

Tax Revenues 326.169.164

Enterprises and Ownership Revenues 14.311.681

Receieved Grants and Aids and Special Revenues 1.095.571

Interest, Shares, and Fines 23.651.345

Capital Income 10.105.296

Receivable Collections 230.701

Self Revenues of Special Budget Administrations 11.445.166

Revenues of Regulatory and Supervisory Authority 2.673.061

Types Of Taxes 2004 2005 2006 2007 2008 2009 2010

Tax Revenues

83,2 79,9 81,2 82,3 82,3 82,3 85,3

Taxes over Income and

Earnings26,3 24,4 23,7 26,0 26,9 27 24,8

Taxes taken over the property 1,3 1,8 1,8 2 2 2,2 2,1

Goods and sevices taxes 36,1 35,2 35,1 34,2 32,9 34,9 37,2

Taxes taken from International

trade 15,6 14,6 16,3 15,6 16,1 13,7 16

Stamp taxes 1,8 1,7 1,9 2 1,9 2 2,1

Mortars 2,1 2,2 2,3 2,6 2,5 2,3 2,8

non-tax revenues

16,8 20,1 18,8 17,7 17,5 17,5 14,6

BUDGET CLASSIFICATION

Budgets; ensuring price stability in the economy,improving income distribution,used fort he realization of the most important financial goals such as the promotion of investment one of the tools.

1) CORPORATE CLASSIFICATIONCorporate classification,management authority has been

recognized as the main criteria. I.Ministries and budget types are formed on the basic. II.Level against the manager directly responsibles. III.Responsible units about implement of these policies. IV.Logistics and Support Units are located.

2) FUNCTİONAL CLASSIFICATIONMonitoring along the time series of state activities and the

opportumity to obtain an internacıonal comparison,ıts possible just by functional classificatıons.

I.First level is divided into ten main functionsnof state activities. II.These functıons are divided into sub functıons in this level. III.This level shows to final services. IV.Its determined to meet the planning needs in this level.

3)FINANCING TYPE CLASSIFICATIONSFinancing type classifications,which is financed from the

resources spending ıt shows.This classificatıon determining the type of payment doesnt matter where the points made it.

4)ECONOMIC CLASSIFICATIONWith the economic classficatıons,state of while performing

their duties and functıons the activities carried out by the national economy,the markets and effects of income distrubution planning,monitoring and evaluation is planned.

a)EXPENDİTURE CLASSIFICATION Current Expenditures Capital Expenditures Lending and Repayment

b)THE ECONOMIC CLASSIFICATION OF INCOME-FINANCING Incomes basing any financial mutural rights or unpaid collectıons are

made. Financing , in order to meet the states clear financing,in return for

their obligations,ıts payments and collections.

The Grand National Assembly of Turkey

1. Budget Bill: The budget bill foresees the revenues and expenditures of the state for the next period and authorizes and permits the executive organ to collect revenues and spending. The budget bill forecasts the expenditures and revenues for the next fiscal year.

2. Enacting the Budget Bil: The Council of Ministers submits the budget bill and a report indicating national budget estimates to the Grand National Assembly of Turkey 75 days before the fiscal year. 

BUDGET PROCESS

3. Enacting the Final Account BillA final account is a mechanism that indicates the

final state of budgetary revenues and expenditure and gives an opportunity to oversee the government. The budget of the previous year is finalized by the Final Account Bill. By adopting the Final Account Bill, the Assembly gives its consent to the performance of the government.