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Tax Law

  • Writer: Derin Halatcı
    Derin Halatcı
  • Nov 16
  • 4 min read

Introduction

Tax Law originates all the way back to ancient civilizations in 3000 BC in Mesopotamia and has played a fundamental role in governance. Today, after more than five thousand years, regardless of the region, aside from a few countries, as a citizen you are very likely to hear the word “Tax” whenever there is an election coming up. Some politicians will even put it right at the center of their campaign or some would simply avoid it. This is because no matter the income level of an individual whether he/she is a citizen below the poverty line or a tech giant CEO, tax is a crucial matter. With this article it is aimed to briefly answer:

  • What is tax law?

  • How is tax administered  and enforced?

  • What is the purpose and function of tax law?

  • Ethical dilemmas of tax law?


What is Tax Law?

Tax Law is a set of rules which determine the legal obligations of taxpayers to give a designated amount of their income or property to a public authority. Tax law primarily aims to give clear answers to three questions listed as: Who is considered as a taxpayer, How much should they pay, and When should they pay. The answers of these questions form the outline of Tax Law by drawing the limits of its authority and power. 


However, it must be acknowledged that the answers may significantly vary depending on the country, creating unique tax systems. For example, a clear difference is seen between how much a regular Turkish citizen pays as income tax and how much a UAE citizen would pay. While individual income tax is 0% in the UAE; it could go up to 40% in Turkiye based on income. 


Yet, while adapting unique systems there are also similar aspects as well. Such as, mostly, citizens and residents being subject to tax law, what kinds of taxes there are, and the executive unit of tax law being government institutions.


It is also important to note that tax law is a very dynamic branch of law. This is because tax law is frequently amended. These amendments mostly take place in order to respond to the economic changes,  inflation rate, and revenue needs of governments.


How is tax administered  and enforced?

As it is with any branch of law, tax law’s effectiveness is directly correlated with the administration and enforcement. This responsibility is undertaken by central tax authorities, such as a revenue administration or tax bureau in most tax systems. The scope of their responsibility is to oversee tax collection,  regulate and audit taxation. 


Through these listed operations tax authorities investigate and verify whether or not taxpayers(citizens, residents,  businesses) acted within the tax laws and fulfilled their obligations. Through this administrative process respective authorities identify misconduct, fraud, and proceed with enforcement measures. In serious cases enforcement may proceed through legal channels. Such as, but not limited, utilizing penalties, fines, and interest charges. As a whole these tools are essential for maintaining public trust in the system since compliance depends on taxpayers trust on the system being fair and just for everyone. 


What is the purpose and function of tax law?

Tax law serves as a tool that ensures the stability and fairness is sustained within a nation'  financial system. Its primary purpose is to create a framework that allows governments to collect revenue from the ones who are bound with tax law. In the absence of such a framework, public services and infrastructural developments, such as health care, education, and transportation would collapse.  Due to tax revenue being the main source of finance for such operations. 


In addition, tax law aims to promote social fairness and equality among members of the society. Which is often achieved by progressive taxation. For example, in Turkiye tax rates on individual income range between 15% to 40% based on one's income. Tax law aims to make taxation considerate of economic capabilities of the taxpayers. 


Finally, tax law is not just about taxation rules; it also involves administrative sanctions when those rules are not followed. These sanctions help tax law prevent abuse. This is achieved through fighting against tax evasion, avoidance, and fraud. So the purpose and function of tax law is to create a fair and just financial framework for governments that  minimizes loopholes. 


Ethical Dilemmas of Tax Law

Despite its importance and regulatory branches to make tax law fair and just, tax law is still subject to ethical dilemmas.


  1. Tax Avoidance vs. Tax Evasion

Within the scope of tax law “tax avoidance” and “tax evasion” is one of the most  debated ethical issues. 

  • Tax evasion: It is illegal, it involves fraud  hiding income, falsifying documents, or falsely reporting earnings. 

  • Tax avoidance: It is legal; however, falls in the grey area of law. This is because tax avoidance, despite being legal, takes advantage of the loopholes to minimize tax payments 

Thus while not evading tax, companies or wealthy individuals may legally avoid tax by exploiting the gaps in the system. This is possible due to their legal team and strategic planning. However, such tools are not accessible for the general public. Which brings up the question: Can tax law fulfill its duty to be free and just for everyone?


  1. Non-taxable Assets

Another major dilemma with tax law is the taxation of non-liquid assets. High income individuals primarily hold their wealth through non-liquid assets, assets that cannot be sold rapidly, such as  real estate, business equity, or valuable investments. These assets can be used as collateral to secure loans, giving wealthy individuals more financial advantages.


However, despite having financial value and its ability to be used as collateral, non-liquid assets are not taxed. This is because the tax system deals with realized income yet fails with unrealized gains. So as long as these assets are not sold and converted into income they are not considered to be taxable. Further more non-liquid assets tend to rapidly fluctuate, making taxation difficult. This increases the gap between the poor and wealthy 


-Derin HALATCI


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