According to J. J. Rousseau’s approach, Country indicates an implicit agreement among individuals who constitute society and this agreement concretizes with constitution. Individuals for realizing this agreement must give tax to the government. However, individuals often cannot easily understand the direct and harmonized connection between government services and tax matters. Also, tax has personal reduction and saving potential in society, due to this potential, tax evasion is possible. This reality is very important for a tax system, which is dependent on the act of declaration. It is imperative that rigorous inspection of the tax inspection system occurs on a regular basis.

The main goal of tax inspection is to create a tax system that works healthy and realizes the expected functions of taxation. If the government desires to cover it growing financial needs, it will enact new taxes, expand the base of taxation, or it will take preventative measures in order to eliminate tax evasion. The first two methods limits are determined by economical or political situations. To eliminate tax evasion a type of security can be applied in each case. Two of the most important aspects of tax inspection are to dissuade the tax evader and to educate taxpayers that made mistakes in preparing their taxes. In addition, it is important to eliminate illegal economical actions, which can be very harmful for the national economic and financial policies and to the domestic and international competition. It is also necessary to provide fair taxation for all of the citizens based upon income. If tax inspection can be evaluated within all of these functions, the importance of the Tax Inspectors Board can be better understood by mainstream society.

1.The Measurements of Performance

The results of the Tax Inspectors Board inspections between the years 1995-2003 are summarized in the table below:

Tax Inspectors inspected 12.566 quadrillion TL tax base and determined a 202 % discrepancy in tax base between 1995-2003. The most important factors within the inspection numbers are the number of active Tax Inspectors, taxpayer activity areas, and the large company activity. If only the active Tax Inspectors are considered, the result’s of the inspection can be seen in the following table between 1995-2003:

The conflict rate of Tax Inspector reports can be determined according to “Pre- Reconciliation Commission” activity results. These results are summarized in the table below:

If this data is reviewed, 80% reports are going to pre-reconciliation, out of this 86%, 81% are reached to pre-reconciliation. Consequently, 65% of all reports written are settled by pre-reconciliation. The other 29% of these reports written are sent to the court for settlement or are going to post-reconciliation, central reconciliation, or should be paid during the trial period which proceeded pre-reconciliation. According to tax law, the crime of tax fraud cannot be considered a reconciliation matter.

The conflicted reports are observed carefully during the tax courts and Council of State periods. Certain tax matters can be evaluated differently between the Tax Inspectors Board and the Council of State.

It is possible to make comparisons according to some data from the Ministry of Finance’s annual reports. The findings of these inspection units are shown graphically below according to inspected tax base and discrepancy in tax base between the years of 1995-1999:

The inspection units’ working results according to productive power can be evaluated with “inspected tax base per inspector” and “reached discrepancy in tax base per inspector” criteria. The difficulty of the evaluation of data in this case is the unit’s investigation of the Ministry’s internal units besides tax inspection other than those from the Tax Inspectors Board. Therefore, it is almost impossible to determine active productive power to spend tax inspection because there is no information about appropriate productive power and days to the tax inspection and Ministry’s investigation. Because of this, the graphic below are created without realizations according to the permanent personnel in 1999:

© 2004 Tax Inspectors Board