If we’re not ready for the earthquake, then where has all of our tax money gone?

Ali Rıza Güngen writes: The earthquake in Elazığ and Malatya in eastern Turkey on Jan. 24 and its casualties have prompted the well-worn discussion about the inadequacy of the state when it comes to disaster preparedness.

Ali Rıza Güngen

The earthquake in Elazığ and Malatya in eastern Turkey on Jan. 24 and its casualties have prompted the well-worn discussion about the inadequacy of the state when it comes to disaster preparedness. Several topics have been brought up, from the issue of assembly areas in cities that have been zoned for construction projects, to what has really been done for earthquake preparedness. Moreover, there are some ominous aspects of the situation, from the preferences of what media outlets cover regarding the earthquake as well as the disregard of previous warnings about the East Anatolian fault line. One of the issues people are focusing on the most is: “Where have all the funds collected as a part of the ‘earthquake tax’ been spent?” This topic was brought up when communication networks failed after the September earthquake in Istanbul. A lack of adequate knowledge about this sometimes leads to incorrect assumptions, and causes us to miss the important aspects that we should be focusing on.

The aftermath of the 1999 earthquake

The root of the earthquake tax debates today is based on the fact that special taxes were levied after the 1999 earthquake, including the special communications tax (SCT), which was part of the new taxes and was later made permanent. These special taxes were introduced in 1999 and contributed to the general state budget until 2003; they included additional income taxes, corporate taxes, interest income taxes and a special communication tax. These can all be grouped together under the heading of the “earthquake taxes.”  

All of the “earthquake taxes” were lowered after 2001 except for the special communications tax. In 2013, the income generated by this tax reached 1.7 percent of the total budget revenue of the central administration. It is difficult to discuss how effective this new tax was in alleviating some of the financial burden faced by the state. This arrangement was made in order to prevent the state from hitting rock bottom; the government was already suffering debt difficulties. The budget had already been drained by a significant bank-saving operation that occurred after the 2001 financial crisis.

Policy makers pushed the cost of the crisis onto society through IMF-mandated primary surplus policies that were designed to bring tax revenue in line with GDP. This topic is another story, but what is important for us now is that only the special communications tax was made permanent among the collective taxes imposed after the 1999 earthquake. In fact, in this period, the scope of the tax was enlarged and it was turned into a comprehensive communications tax.

Thus it’s not completely appropriate to say that earthquake taxes have been collected since 2004. However, because of the expanded special communications tax and the associated budget priorities, it’s also not appropriate to close the discussion here when it comes to this topic. 

Taxes and expenditures

The share of the SCT in budget revenue was upheld to a large extent until 2009; after that year, there was a relative drop. If you add together the amount of SCT based on official data, you reach a figure close to 65 billion lira. When you adapt this to 2019 using the state’s official [inflation] ratios, it is possible to see that the state has collected, in the name of special communication tax alone, 140 billion lira. It would not be wrong to also convert this figure to US dollars. For instance, the former deputy head of the opposition Republican People’s Party (CHP), Faik Öztrak, came up with a total of 36 billion dollars by adding together the annual averages of the special communication taxes in dollars since 2000. Ahmet Kıvanç from Habertürk, based on Turkish lira figures and starting from 1999, says that 66 billion lira have been collected in the name of the special communications tax.

Tax collected according to years 

This is the figure that is wrongfully called "the earthquake tax" from time to time by the public. It is actually 140,000,000,000 lira in terms of 2019 prices. It is indeed very questionable when one compares the communication infrastructure we have with the loads of money collected. Let us make it clear once more that the taxes that were introduced after the earthquake, and the special communication tax that was made permanent afterward, have all been transferred to a general pool that includes other tax revenue; they have not been separated for the purpose of financing earthquake preparedness.

Death or perception?

Thus, the question of what happened to the taxes collected can be answered as such: The money collected from “earthquake taxes” between 1999 and 2003, and from the SCT that was made permanent after 2003, have been transferred to the central budget as-is. State financial aid to the victims of the earthquake and the construction costs of both permanent and prefabricated temporary housing were all paid from the central budget, not from an earthquake fund. These funds weren’t used for earthquake preparedness, but rather mostly for repairs afterwards. In other words, in this country in which hundreds of communities are built on top of fault lines, very little has been done in the name of earthquake preparedness in the past 20 years.

The sleaziness of the bureaucrats who seem to care more about the “perception of the public” than actual casualties, the capacity problems of state institutions (which are generally considered as unreliable by the public), and the fact that we are not prepared for earthquakes raise the question of “Where and how are our taxes spent?”

This is a very legitimate and appropriate question.

There are two legs of the issue: The first is that, these days, the state is making other substantial payments that potentially hamper other services that are expected from modern and rationally-run institutions. For instance, we have a state that will pay more than four times the amount of SCT collected in one year to a handful of companies that are associated with public-private partnership projects. We have a state that is planning to give up (through tax expenditures) tax revenue that is more than the total of earthquake taxes collected between 1999 and 2003 in addition to the total of SCT collected after 2004. A bureaucrat who is more interested in measuring the “perception of the public” will surely be deaf to this, but we should constantly reiterate ourselves. In short, we should continuously ask, “Where are our taxes?”

The second leg of the issue is the loss of a general institutional capacity, as well as the indicators of total collapse. The present budget allocations, which are only functional for capital owners and which serve to deepen social issues, do not quite have room for policies that are in favor of society — for instance, for comprehensive and meaningful earthquake drills. Several annual budgets, full of holes, were followed by "zoning amnesties," which is a way to generate unearned income through construction. In this way, buildings that are not resistant to earthquakes have been legitimized.  

As a result of similar other steps, certain institutions are able to spend above their legal limits. It may seem illogical to expect an administration to respect expenditure restrictions in a country in which the constitution and laws are (partially?) suspended. However, the general lack of control over expenditures is the basis of not allocating adequate resources for areas such as earthquake training and structural reinforcements. 

In short, the lack of proper control creates deterioration in the law. Institutions that are unreliable when it comes to the provision of basic services, and revenue that is not spent properly, leads to the question of where the earthquake tax funds are. We should continuously ask where our taxes are spent, but it is quite obvious that we will not get any response. So, it is up to us now to form independent monitoring committees that carefully monitor transfers from the central budget and regularly inform the public.

Let us not forget: We should ask these questions, but it’s on us alone to be able to give the answers.

Topics Earthquake