Tax issues still unaddressed, no deal on local Twitter office

Though Turkish authorities and Twitter executives found common ground on various topics in their two-day meeting in Ankara this week, the tax-related issues remain unresolved, as the San Francisco-based company on Wednesday denied claims made by government officials that the social media company had agreed to establish a local office in Turkey.

Transportation, Maritime Affairs and Communications Minister Lütfi Elvan said on Thursday that the meetings with Twitter representatives were positive and that the parties had reached a consensus to keep the channels of communication open to be able to tackle the current and any possible future obstacles quickly.

In a written statement, Elvan maintained that Turkey and Twitter’s executives agreed to work together to implement court decisions, close false accounts and on the removal of inappropriate content.

However, the company has not agreed to the government’s demand that Twitter open an office in Turkey and pay taxes on income earned in Turkey.

Twitter’s vice president and global public policy head, Colin Crowell, told The Wall Street Journal (WSJ) that the company has made no pledge to the Turkish government to open a local office. Crowell was part of the delegation in Turkey this week to participate in the discussions to resolve the company’s conflict with the Turkish authorities.

Deputy Prime Minister Emrullah İşler said early on Wednesday that the Twitter executives had consented to the government’s demand that the company open a local office in Turkey and start to pay taxes on the revenue it earns from Turkish companies. Government authorities had also asked Twitter to shut down the accounts of those expressing opinions that violate the personal rights of others, he said.

Turkey reportedly demanded that Twitter open a local office and start paying Turkish tax on Monday in the first direct talks since a two-week ban was imposed on the site.

Prime Minister Recep Tayyip Erdogan’s government blocked Twitter and YouTube in March, drawing international condemnation, after audio recordings that purportedly reveal corruption within his inner circle were leaked on the sites.

The block on Twitter was lifted 10 days ago after the Constitutional Court ruled that it violated freedom of expression, a decision Erdogan subsequently said was wrong and should be overturned. YouTube remains largely blocked in Turkey.

The prime minister has accused Twitter of being a “tax evader,” and maintained his combative stance ahead of the talks between his government and the San Francisco-based company.

“Twitter, YouTube, Facebook, these are international companies. They’re companies established for profit,” he said at the opening ceremony of a water purification plant in Istanbul on April 12.

“We will deal with them. They will come like every international company and comply with my country’s Constitution, laws and tax rules,” CNN Türk reported Erdogan as saying.

In his comments to the WSJ, Crowell denied the claims that the company and the Turkish government had discussed tax issues during their meetings in Ankara. “We didn’t have a direct conversation on the tax issue,” Crowell said. He added that Twitter manages ad sales through a reseller in Turkey and doesn’t directly do business in the country.

Finance Minister Mehmet Şimşek announced on Tuesday that Turkey may sidestep international treaties so that it can collect corporate and revenue taxes from companies that provide social media services online.

He also suggested that an increase of anywhere from 18 to 36 percent in the value-added tax (VAT) might be applied on Turkish companies who advertise via these social media platforms as a deterrent.

The government estimates that Twitter generates $35 million a year in advertising revenue in Turkey, and none of it taxed by Ankara, according to recent media reports.

İlhami Söyler, an academic at the Turgut Özal University faculty of law, told Sunday’s Zaman that an agreement signed between Turkey and the US on the prevention of double taxation in order to promote economic relations between the two countries exempts firms from corporate income tax, but it does not include the VAT. “If an office is opened, the tax issues may be solved,” he added.

Turkey may also apply for international arbitration to resolve the tax problem with Twitter. “Unless the dispute is related to matters of public security, there is nothing preventing Turkish officials from using arbitration,” said Cumhur Rüzgareser, another academic from the faculty of law at Turgut Özal University.