4th August 2014
Turkey must make major improvements to the regulatory regime for businesses if it is to foster growth in the years ahead, claims a new study from the Organisation for Economic Cooperation and Development (OECD).
The body, which has just published a new global standard for the automatic sharing of tax information, says Turkey’s future hinges on implementing structural reforms that boost productivity and competitiveness across the economy.
“Structural change in the business sector would strengthen competitiveness, exports, employment, income and savings, help rebalance domestic and external demand, and move the economy toward an externally sustainable path,” says the report.
“Turkey should strive to make its product and labour market regulations more growth-friendly while continuing to reduce regulatory obligations related to company size.”
It warns that small businesses often circumvent much of the regulatory framework. These companies employ most of the workers in the country and therefore it is vital they become part of the full financial and accounting framework.
In contrast, the OECD notes that large institutional firms often face heavier legal and regulatory burdens, particularly relating to tax and social obligations. As a result of this “segmentation” of the business sector, productivity gains are hindered, while there is a growing “social divide” between the workers of these types of firms.
With this in mind, the report claims regulatory and tax reforms should try to make the business conditions the same for all firms, regardless of size.
“Enforcement should become more predictable,” the OECD adds. “Economy-wide productivity, competitiveness and income would improve considerably if a higher share of the working age population were employed in the more efficient firms.”
Meanwhile, the report also calls for a shake up of “rigid” labour market rules that it says are holding back growth across the business sector. The OECD would like to see the end of restrictions on different forms of employment, such as temporary work, employment through work agencies, home-based work and remote work.
This, it claims, would make it easier for businesses to hire low-skilled workers and therefore foster job creation in the formal sector. This could also open up higher quality jobs to women in the formal sectors of the economy.