A package of tax reforms was signed by President Demirel on 30 December, just in time for its implementation in 1994. The reforms aim to raise the ratio of tax revenues to gross national product (GNP) to 25 per cent in 1995, and to 29 per cent by 2000, compared with 19 per cent at present. More radical measures were dropped after pressure from the opposition.

Key elements include scrapping nine out of 20 exemptions for corporate taxation, which is expected to bring in an additional TL 55 million million ($3,700 million) in 1994. However, the new law also reduces the full corporate tax rate to 25 per cent from the previous 46 per cent, in an attempt to eradicate the present widespread evasion. The package also raises the minimum level of investment required to qualify for corporate tax exemption, but as an incentive, cuts corporate tax rates for firms making public share issues.

Income tax will now be levied on dividend earnings of more than TL 225 million ($16,000), where previously all earnings were exempt. The package also simplifies charges on financial instruments, introducing a broad 5 per cent tax on earnings from treasury bills, deposits, government bonds and repurchase agreements, and a 10 per cent tax on asset-backed securities and private sector bonds. However, the government was forced by parliamentary opposition to drop a proposed 20 per cent tax on gains from corporate tax exemptions on investments. Increased sales taxes on luxury goods have also been deferred.