The Road (Not) Taken: Help a Man to Fish
By Alison Rogers ’12, Staff Writer
“Sell a man a fish, he eats for a day, teach a man how to fish, you ruin a wonderful business opportunity.”

— Proverb attributed to Karl Marx

Tourists who buy fish dinners on the famed Galata Bridge in Istanbul are often surprised by the bills they receive. It’s easy for them to grow angry at the waiter who hands over the bill, because it is never itemized and always more expensive than the guests expect. If, by chance, the fish is priced by kilo or by plate, the menu usually lists cost around 30 lira (20 U.S. dollars). But the final bill, after the service, may be as high as 60 to 100 lira. Usually, a mysterious 18 percent fee has been spread across the bill and labeled “tax.” Tourist books often warn that expensive bills are common, but they never quite explain why Turkish businesses sometimes fail to list total charges on price tags, leaving visitors feeling pick-pocketed. Upon speaking with a financial consultant who volunteers on weekends at the Blue Mosque in Sultanahmet, Istanbul, the hidden fees and this mysterious 18 percent tax that appears at places like Galata, but not often at local haunts, was made clearer. After observing life outside of Istanbul, such as those led by Turkish carpet weavers living near Izmir, I find the deception of Turkish businessmen is more easily forgiven.

The tax structure in Turkey is drastically different than in the United States. Rather than a sales tax, Turkey uses the value added tax, or VAT, on local purchases and imports. The value payable is considered “input VAT.” and the amount collected on sales in called “output VAT.” The tax owed is the difference between the input and output. If the amount payable is less than the sale of the commodity, then the balance is carried forward to the following months and can be offset against future output VAT. This means, should a supplier never sell a product, he can lose the tax on that product forever. The government tax thus burdens the producer. For the sake of simplicity, this means that, before a sale is guaranteed, the seller owes tax to the government. Because it would be unreasonable to list the VAT margins on the consumer’s ultimate itemized bill, Turkish visitors must take for granted the reasonableness of the total price listed on a receipt in many cases. However, because the Turkish government does not conduct auditing, businessmen often take advantage of this indirect tax system and charge 18 percent of the total bill on top of menu prices labeling it “tax” on the receipt, though the menu prices already include tax as listed. Moreover, the government has no way of conducting auditing in Turkey. It is possible that sometime along the supply chain, exploitation of this shoddily-monitored tax system occurred, and the restaurant owner could just as easily have been unfairly burdened by his own supplier. Sellers are not required to itemize their bills, and thus consumers must place faith. While locals may know how to reasonably price food, or be able to guess the tax and profit included in a bill, tourists are often taken in. When tourists do speak up, the mysterious difference between menu price and total cost is explained as an 18 percent sales tax plus tip. The waiter often excuses the tip.

In 2002, the Turkish government introduced the special consumption tax which replaced 16 different indirect taxes and brought the system more in line with European Union directives. While VAT must be calculated upon each delivery from seller to buyer, the Special Consumption Tax is charged only once.

The lack of clarity in tax law and regulation exposes just one source of corruption affecting the everyday lives of Turkish citizens. Unlike Turkish citizens, the way Turks do business in the city comes as a shock to visitors from the United States. While corruption and exploitation is marginalized in the United States, Turks have come to see corruption as part of the mainstream. It is acknowledged as a normal part of the working economy. Perhaps the words of a political science student at Bogazici University explain it best, “Everywhere there is corruption, among politicians and the government especially. Because it doesn’t get fixed, everyone asks, ‘Why shouldn’t we also try to get a bigger [piece of the pie]? Why should one man suffer? If no one helps him, he should help himself.’” There are plenty of well-off Istanbullus, but there are also citizens working unreported jobs and living in unregulated shanty towns, receiving below minimum wages under the table, or staying in buildings vulnerable to earthquakes and health hazards.

Recently, the government has created tax reform laws aimed at improving the lives of Turkish carpet weavers in Turkey. Turkish carpets are well-known throughout the world for their ancient techniques and fine silk. The finest silk carpets, depending on the amount of knots per square inch, can take up to two years to make by hand. Across Turkey, various semi-nomadic tribes travelling from Asia to Anatolia have passed down the carpet-making tradition from mother to daughter for over 3000 years. While carpet-making requires intensive labor, these young women are often severely underpaid. The government has supported tribal cooperatives which help cut out the middlemen. These co-ops are exempt from taxes and can also receive refunds for shipping costs on each carpet sold, training for new weavers and other subsidies. The managers of these cooperatives must report the wages and total sales price in order to receive these write-offs. As a result, the government claims carpet weavers are receiving a larger percentage on the price of each carpet.

Even with government support, an entry- level carpet weaver in Izmir can average about 15 U.S. dollars a day, or 30 Turkish Lira. Near Kusadesi, where the particular cooperative I visited was located, a tour guide rented a seaside apartment for 400 Lira a month. He is salaried by tour agencies, but often receives wages and tips under the table. Comparatively, one woman carpet weaver’s salary covers only a little over a quarter of his monthly rent.

Ultimately, Turkey’s tax structure is crippling the economy. Business must incur risk before they guarantee a sale, and often unregulated or indirect trade burdens consumers and employees. Visiting Istanbul, it is easy to forget about the margins, as mainstream Istanbullus watch carefully over their appearances, and high fashion boutiques are sprinkled every few blocks in highly frequented districts. Modern reform and technological innovation have swept through many parts of Turkey’s growing cities, contributing to economic expansion, democratic pluralism and growing opportunity for the average citizen, but interwoven between shopping, business and tourists districts stand the shanty towns. In just the past 10 years, the population of Istanbul increased from two million to 22 million as semi-nomadic tribes and villagers, including many carpet weavers, abandoned the countryside for the city looking for fairer pay and take advantage in Istanbul. In the city, under the table wages is better than no wages in many cases. Thus, when a waiter asks for 20 extra Euros, it may help him pay the rent in a way his wages might not be able to. Asking for 18 more than is honest might be viewed as quite common and fair in his eyes.

Still, while the government continues to look the other way, black marketeering expands, and skirting taxes has come to be acceptable in many ways, not all Turks feel loopholes in tax law. Under the table wages, tax exemptions and a lack of government auditing make up for unmonitored factory owners, business owners and landlords who exploit the system to laborers’ detriment. Not only do Istanbullus feel the city’s infrastructure has failed to protect residents from natural disaster and health hazards in the last 10 years, but the government too has recognized the emergence of these issues as a consequence of the unregulated economy. When people starve in the countryside, they move to the cities. Despite support for cooperatives and fair trade, there is a long way to go before the stigma of corruption in the Turkish economy will be lifted.

Issue 10, Submitted 2010-12-01 00:47:37