Is everything in public finance?
OĞUZ OYAN Lack of lessons from the past It is an old story that the governments from the right politics do not want to limit themselves to the budget. In the new period under the supervision of IMF after 1980, ANAP government (1983-91) developed new methods to overcome budget constraints. This method had two pillars: (i) marginalizing the budget based on extra-budgetary resources; (ii) borrowing from financial markets unseen until then […]
It is an old story that governments from right-wing politics do not want to limit themselves to the budget. In the new period under the supervision of IMF after 1980, ANAP government (1983-91) developed new methods to overcome budget constraints. This method had two pillars: (i) marginalizing the budget based on extra-budgetary resources; (ii) borrowing from financial markets, unprecedented in that period.
The first of these methods had two aspects: One was to create large and unsupervised revenue-expenditure areas competing with the overall budget through the extra-budgetary funding system; Two, launch customization applications. The fund system was expanded so quickly that by 1991, total fund revenues could reach 57 percent of budget revenues! There was no historical example of such a practice, except in the case of the collaborative Vichy Government in France during World War II. The “privatization” practices, which have been tried to be put into operation since 1986, have been significantly slowed down by the determined struggles of the trade unions and KİGEM (Public Enterprise Development Center) due to the lack of legal infrastructure.
Pursuant to Özal's wannabe practices, which followed these “supply-side economics” policies (in practice Reagan-Thatcher's practices), which could be summarized as a consol In 1985, the tax burden fell to the lowest rates. There was also a change in the tax structure: indirect taxes, which were by definition unfairly fair on expenditures rather than direct taxes such as income and corporate taxes, began to represent an increasing proportion of total tax revenues. As a matter of fact, VAT and SCT entered our financial system after 1984.
The second pillar of overcoming the budgetary constraints was the introduction of domestic borrowing through financial markets. (Prior to 1980, the sources of domestic borrowing were generally publicly controlled social funds. The long-term social funds of institutions such as the Pension Fund and SSK, and so-called pension / reserve funds for civil servants and workers such as MEYAK and IYAK). Özal's alma tax-borrowing-borrowing ”approach would extend the budget's interest payments remarkably. So much so that in the late 1990s, more than 100 percent of the profits of the 500 Big Firms were derived from non-operating areas. (“More than 100 percent anlam means that even the loss incurred from the field of activity can be compensated excessively with interest income obtained from Government Domestic Debt Securities = GDS). Public finance was made available to the capital as a suction pump.
The AKP's experience of ruling ANAP, the most decisive political example it had taken from the past, constituted a system of public finance, both liberal and uncontrolled. In the liberal Western economies there was no precedent, because there was necessarily a sphere of social / political control in which administrative oversupply would eventually hit. But the study of social control in Turkey (after the AKP's political control can not work for a long time) Given that this system would continue until it rests on the border financial impossibility. These limits were reached in 2000/2001: All tax revenues were incapable of covering the budget's debt interest payments. This distortion in fiscal 1998, after the re-seized the reins of management of the economy in Turkey, IMF / WB in the economy of a comprehensive restructuring program for the twins would have produced one of the reasons. (However, the IMF had tolerated the funding and domestic borrowing frenzy that began in the 1980s).
When the AKP came to power in 2002, the “mess” was cleared. Most of the public private funds were liquidated, the public sector was subjected to significant spending cuts and forced to give primary surpluses (primary surpluses), discrete weeds in the banking system, most of which were the results of the privatization pillage in public banks, were cleared (again by transferring loads to the public and the SDIF). ultimately, with the contribution of the 2001 crisis, significant burdens were imposed on large masses.
The political Islamist movement, which for the first time had gained a majority that could form a government alone, would not hesitate to turn the situation into an opportunity. In front of it was a Kamu portfolio Kamu of a State Economic Enterprises (SEE) that was included in the privatization scope; Non-SOE assets also increased appetite. Domestic and foreign capital had the same appetite. Thus, a miraculous combination of “neoliberal Islamism” (ıyla liberal-conservatism ıyla in its preferential capacity both inside and outside) appeared. The privatization of 28 billion dollars in the period of 2004-2008 has been reached 3.5 times of the privatization of 8 billion dollars in the period of 1986-2002. In 2016, the AKP exceeded the $ 60 billion limit, and by the end of 2018, it had generated nearly $ 70 billion in privatization revenue. Adding to this was the sale of ports, land, and asset sales through the SDIF, which were privatized through the Ministry of Transport, and reached a figure of over $ 85 billion. Nearly three quarters of this revenue was transferred to the budget as revenue. AKP almost found itself in the position of a fox appointed to the chicken coop. Equivalent to the abundant and cheap credit conjuncture in international markets was a bonus.
Thus, the period of high budget deficits / internal deficits between 1985-2001 shifted to a period of public finances, characterized by moderate budget deficits, which yielded primary surpluses during the AKP period following the IMF corrections. The problem that was more prominent during the AKP period was external deficits; high current account deficits led to high external debt stocks; After 2009, the facilitation of the private sector's external borrowing facilities also spread foreign debt. Nevertheless, thanks to the high value of TL, the ratio of foreign debt to MG could be kept virtually low for a long time.
On the other hand, ılım moderate ”budget deficits also had some“ secrets.. The IMF control on public spending was a reason for this. The most obvious example of this was that the agricultural support which had been 1.5 percent compared to the MG before 2000s was reduced to 0.4 percent. In the meantime, the tendency to take many public expenditures out of the budget for years could spread public deficits in time and make them invisible in the short term. All variants of the Build-Operate-Transfer or Public-Private Partnership models, as passenger / vehicle / patient / rent guaranteed systems, created high costs and excessive rent mechanisms on the one hand, and on the other hand served to curtail public deficits in the short term. However, in recent years, the provisions allocated to passenger / vehicle guarantees had started to create considerable burdens in the budget.
The more important aspect was public revenues. During his term in power, the AKP was careful to patch extraordinary sources of income into the budget, to keep budget deficits lower than expected, thus compensating for high external deficits by “reasonable” internal deficits. This effort, however, was only partially effective, as one-off sources of income were not taken into account in the IMF-defined budget deficits. However, for example, the proceeds of tax peace / amnesty were not considered extraordinary; because they could also be seen as revenues that should have already entered the budget but were made easier to pay because of delays in collection. Moreover, these amnesties were implemented so often that public finance had become a collection routine.
The most important of these extraordinary budget resources was undoubtedly the privatization revenues mentioned above. Apart from that, extraordinary methods of income such as paid military service (except currently designed), land sales under 2D and zoning amnesty were used throughout the period. The potential of these practices to cause greater social problems than the income they provided was always overlooked.
Although it is not unusual to transfer the profits of the CBRT to the Treasury, it is included in the extraordinary revenues of the periods in which it was realized. If the CBRT detects losses, it will have the opposite effect, but profit transfers have been realized mainly during the period. The fact that these profit transfers were realized in January instead of May to finance election expenditures in 2019 shows the tightening in budget deficits. More serious are statements of intent that the CBRT's Reserve Fund (as of today, more than TL 40 billion) has been taken into consideration as an ointment for the high budget deficits of 2019.
Another extraordinary seizure mechanism was used for the resources of the Unemployment Insurance Fund (ISF). The years in which some of the ISF's resources were directly transferred to the budget under the pretext of GAP investments are within the scope of extraordinary budget revenues. However, in recent years, indirect transfers have been continuing unabated. By indirect transfers, financial incentives to capital (such as employer and employee SSI premiums, assuming the minimum wage of the worker in new employment) are met through the ISF. If the ISF had not been intervened, for example, the SSI would demand from the Treasury for the premiums that it could not collect, thus increasing the expenditures (or borrowing) of the General Budget by the same amount. On the other hand, the maturity of public debt is extended and interest averages are reduced through the ISF, which is an important buyer of government securities. (Compulsory PPS and designed Severance Pay Fund may be used for the same purpose). These practices erode workers' unemployment security and reduce public interest expenses. A final application of the same gravity for the ISF was the funding of state-owned banks. If the ISF had not been introduced, the losses of state banks would be covered by the Treasury and the budget deficits would rise by the same amount.
Extraordinary budget revenues are being transformed into practices that ignore the Assembly's right to budget as they constitute a violation of all legislative / audit principles. Moreover, it hinders the healthy management of not only the budget but also the public institutions such as ISF and public banks.
Long time served plus the exterior and interior of Turkey's economy not to open such agreement ( "the twins not to open") has come to the end of the conjuncture. Two-thirds of the annual deficit for the 2019 budget was provided in the first quarter; Treasury cash deficit increased fivefold in the first five months of the year compared to the same period of the previous year; In the first five months of 2019, the Treasury applied for an external borrowing close to the total of 2017 and 2018, etc. alarm signals. Behind this, as well as the economic contraction conjuncture, significant erosions in budget tax revenues play an important role. While private expenditures and imports have contracted, indirect tax inflows have weakened, while the rise in losses in companies and unemployment has led to a similar situation in direct taxes. The decrease in collection / accrual ratios also shows that companies (with the expectation of amnesty) convert state tax revenues to working capital. The fact that there is almost no Corporate Tax liability other than 500 large firms is another indicator of both the extent of tax evasion and the bankruptcy of the tax system.
The possibility of saving the year by releasing additional taxes after 23 June remains contradictory in the economic downturn. The application of a radical wealth tax does not seem appropriate both to the legitimacy of the government and the open economic conditions. However, new cuts in agricultural subsidies, social benefits, pension rights and public investments are on the agenda.
Passed through crises table, inside the deficit in Turkey as a major problem area shows that re-appear. In this respect, a period has been entered in which the question her is everything in public finance going to the top m will not fall off the agenda?