Evaluation of the Additional Motor Vehicles Tax within the Scope of Constitutional Tax Principles

1. General Considerations 

Based on their sovereignty, states have the authority to levy taxes on all persons living on their territory and subject to their nationality. The power to tax is the legal and de facto power of the state to levy taxes based on its sovereignty over its territory. The state finances public services with the taxes it collects. As a rule, the power of taxation belongs to the legislative body. 

Tax Law is closely related to the principles of democracy, rule of law and social state. While exercising its taxation power, the State should act in a measured, non-arbitrary manner and in a manner that does not touch the essence. In addition, tax laws are always open to the review of the Constitutional Court. There are some constitutional principles in tax law. The constitutional principles of taxation are the Principle of Taxation According to Fiscal Power, the Principle of Equality, the Principle of Legal Security, the Principle of Rule of Law, the Principle of Social State, the Principle of Generality in Taxation, the Principle of Proportionality in Taxation, and the Principle of No Tax Without Law.  The subject of our examination is related to the Legal Security Principle and at this stage, only the relevant principle will be explained. 

2. Evaluation of the Additional Motor Vehicles Tax in terms of the Legal Security Principle 

It is accepted that the principle of legal security consists of two sub-principles, namely the principle of non-retroactivity and the principle of certainty. The principle of non-retroactivity refers to the control of the actions and transactions of the state in a non-retroactive manner with the legal rules of the day. The principle of certainty, on the other hand, states that tax-related institutions and transactions should be clear and understandable by everyone.

The principle of non-retroactivity is a concept related to the application of laws in terms of time. The reflection of the principle of retroactivity in tax law can be expressed as "a new tax norm can only be applied to tax-generating events occurring after the date of entry into force". In other words, a new tax norm will not have legal consequences for taxable events occurring before the date of entry into force. Retroactivity of tax laws may have negative effects both in legal and de facto terms. Examples of adverse legal effects may include damage to acquired rights, damage to legal security, deterioration of legal peace and integrity. The example of deterioration of stability in commercial life can be given for the negative effects in actual terms. Although the principle of retroactivity is not explicitly regulated in our constitution, it has become binding in our law with the recent jurisprudence of the Constitutional Court. As an example of the jurisprudence of the Constitutional Court, in the Constitutional Court decision dated 07.11.1989, numbered 1989/6 Main, 1989/42 Decision, the following statements are made "Since regulations in the field of taxation are also enacted by laws, non-retroactivity is a natural obligation for tax laws. The views that make this obligation inevitable have gained majority in the doctrine. These views, which are centred on trust in the state and the legal order, are generally valid for all laws (except for the obligations in procedural laws). Leaving aside the conditions of exception, the general rule is that non-retroactivity is a dominant feature for all laws." However, the principle of non-retroactivity is not an unlimited and absolute principle; it may be limited in certain circumstances. Some principles are observed by the Constitutional Court in the review of non-retroactivity and decisions are made in the light of these principles. Some of these principles are the principle of public interest, the principle of acquired rights and the principle of proportionality.

3. Motor Vehicles Tax in Turkish Law

Although there are various types of taxes in Turkish law, the motor vehicles tax (MTV), which is the subject of our examination, is written in the Motor Vehicles Tax Law, and Article 9 of the law regulates the payment of MTV. According to the relevant provision, the MTV is paid in two equal instalments in January and July each year. As can be seen, the provision is a mandatory provision.

Assessment, notification and payment of the tax

Article 9- (Amended: 3/12/1988-3505/26 Art.)

Motor vehicles tax shall be deemed to have been accrued annually at the beginning of January each year by the tax office of the place where the vehicles are registered and registered. However, if there is a change in the tax amounts in accordance with Articles 10 and 11 of this Law during the year, the tax to be paid according to this change shall be deemed to have been accrued at the beginning of the following last six-month period if the change is made in the first six months of the calendar year, or at the beginning of the following calendar year if the change is made in the last six months.

The accrued tax shall not be notified to the taxpayer separately and shall be deemed to have been notified on the day the tax is accrued. (Additional sentence: 4/6/2008-5766/9 Art.) However, in case the motor vehicles tax to be accrued is under-accrued or not accrued at all, this tax shall be levied by the relevant tax office.

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Motor vehicle tax is paid in two equal instalments in January and July each year. In the first six months of the calendar year, if there is a change in the structure of the vehicle or if the tax is increased or decreased, the second instalment is paid according to the new situation.

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In the event that the vehicles listed in tariffs (I), (I/A), (II) (...)(1) and (IV) are registered and registered for the first time during the year, the tax is accrued annually. The overdue part of the accrued tax shall be paid within one month from the date of registration and registration. However, in the registration and registration procedures to be carried out after the first six-month period, only the tax for the second six-month period is accrued and paid. In the case of registration and registration to be made in January and July due to transfer and assignment or change of owner due to sale, the tax shall be paid before this change is made.

4. Additional Motor Vehicle Tax Regulation 

Apart from the aforementioned regulations, with the law dated 14/7/2023 and numbered 7456 published in the Official Gazette dated 15/7/2023 and numbered 32249 on 15/7/2023, additional motor vehicles tax was introduced and entered into force on 15/7/2023 with the article 1 of the Law on the Amendment of Certain Laws and the Decree Law No. 375 and the Law on the Issuance of Additional Motor Vehicles Tax for the Compensation of Economic Losses Caused by the Earthquakes Occurring on 6/2/2023. The relevant article is as follows: 

Additional motor vehicle tax

ARTICLE 1- (1) Vehicles that are subject to tax according to the tariffs numbered (I), (I/A), (II) and (IV) in the 5th, 6th and provisional 8th articles of the Motor Vehicles Tax Law dated 18/2/1963 and numbered 197 and registered and registered in the relevant registry on the date of publication of this Law and vehicles that will be registered and registered for the first time in the relevant registries from the date of publication of this Law until 31/12/2023, is subject to additional motor vehicle tax up to the amount of motor vehicle tax accrued for the year 2023, for one time only.

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(5) The additional motor vehicles tax related to the vehicles registered and registered in the relevant registries on the date of publication of this Law shall be paid in two equal instalments, the first instalment until the end of the month following the month of publication of this Law and the second instalment until the end of November 2023; the additional motor vehicles tax related to the vehicles to be registered and registered for the first time in the relevant registries between the date of publication of this Law and 31/12/2023 shall be paid in advance together with the motor vehicles tax of these vehicles.

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5. Similar Constitutional Court Applications in the Past

Currently, the Constitutional Court has applied for the cancellation of the relevant regulation. It should be noted that almost exactly the same situation was experienced in our law 20 years ago.  2003 Bingöl Earthquake was a 6.4 magnitude earthquake that occurred on 1 May 2003 at 03.27 local time, affecting the eastern part of Turkey. After this earthquake, an additional MTV was attempted with Article 1 of the Law No. 4837 dated 3.4.2003 "Law on Additional Taxes to Ensure Economic Stability". The relevant article reads as follows: "Vehicles which are subject to tax according to the tariffs numbered (I), (II), (III) and (IV) in Articles 5 and 6 of the Motor Vehicles Tax Law dated 18.2.1963 and numbered 197, and which are registered in the relevant registry at the date of publication of this Law, are subject to additional motor vehicles tax up to the amount of the motor vehicles tax accrued for 2003, for one time only. Additional motor vehicle tax shall be deemed to have been accrued and notified on the date of publication of this Law. Real and legal persons who have accrued motor vehicles tax for the year 2003 as of the publication date of this Law shall be subject to additional motor vehicles tax equal to the motor vehicles tax accrued for the year 2003. The first instalment of the tax shall be paid until the end of the month following the publication of this Law and the second instalment shall be paid in equal instalments until the end of October 2003 to the tax office where the vehicle is registered. Local administrations shall not be allocated a share of the collected taxes according to the Law dated 2.2.1981 and numbered 2380 and the Law dated 27.6.1984 and numbered 3030." Following the additional MTV regulation to be levied by the aforementioned law, an application was made to the Constitutional Court for the cancellation of the provision of the law. The Constitutional Court found the relevant provision unconstitutional and cancelled it with its decision dated 23.7.2003 and numbered 2003/48 Esas 2003/76 Karar. (Official Gazette date/number: 11.09.2004/25580)

In the examination of the relevant article, the Constitutional Court stated that "With the Article 1 of the Law that is requested to be cancelled, the motor vehicles tax levied in 2003 is levied for the second time in the same year under the name of additional tax. However, in accordance with Law No. 197, the motor vehicles tax for 2003 has already been updated by applying the revaluation rate according to the Tax Procedure Law. By accruing and collecting the additional tax for the second time in 2003 over the new updated amount, the tax burden is aggravated to the detriment of vehicle owners and is not reflected on other taxpayers such as income and corporate taxpayers. This situation is contrary to the principles of taxation stipulated in Article 73 of the Constitution by preventing the balanced, fair, measured and equal distribution of the tax burden. Although it is stated in the general justification of the Law that this regulation has been made in order to ensure economic stability and to reduce the public debt stock, it is not possible to accept this as a justified reason necessitated by extraordinary conditions. For the reasons explained, Article 1 of the Law is contrary to Articles 2 and 73 of the Constitution. It must be cancelled." The statements are included.

6. Evaluation 

It is seen that history repeats itself and a similar regulation has been made on the same issue. If the Constitutional Court issues an annulment decision regarding the relevant regulation, since this annulment decision will be binding for everyone, taxpayers who have not made the additional MTV payment until the entry into force of the decision will be released from tax liability. However, in accordance with the principle of non-retroactivity of cancellation decisions, taxpayers who have made payments until the cancellation decision may not be able to recover their payments. On the other hand, the magnitude of the earthquake in our country and the necessity to create the necessary resources in order to fulfil the obligations of the state in meeting the damages should not be ignored. In conclusion, when the effects of the devastating earthquake that deeply injured our country and the constitutional tax principles are evaluated together, the decision to be rendered by the Constitutional Court is eagerly awaited.