By Yeliz Candemir and Emre Peker
ISTANBUL--Turkey's Finance Minister Mehmet Simsek said Tuesday
that social-media companies such as Twitter Inc. must pay taxes to
Ankara, signaling the next round in the government's scuffle with
global Internet firms that dominated an otherwise uneventful budget
presentation.
Social-media firms must establish offices in Turkey because they
engage in ongoing trade but avoid paying income and corporate taxes
without a local branch, Mr. Simsek said, articulating the
government's demands from companies such as Twitter and Facebook
Inc.
"Many social-media firms, including Twitter, are reaping unfair
profits from Turkey and they aren't paying taxes due on those
gains. We see this as a serious problem," Mr. Simsek said.
The finance minister's declarations follow a tug of war between
Turkey and mostly U.S.-based Internet companies, whose services
have emerged as key forums for the opposition to organize and voice
dissent. Turkey banned Twitter March 20 and only lifted its
blockade April 3, after the constitutional court overruled the
blackout.
Twitter representatives, led by Vice President Colin Crowell,
have been meeting since Monday with Turkey's telecommunications
regulator and officials at Prime Minister Recep Tayyip Erdogan's
office in Ankara. The government is seeking four concessions from
Twitter: establishing a local office, implementing Turkish court
orders, enabling account blocking, and tax payments.
The company asked for an audience with the Finance Ministry as
well, Mr. Simsek said Tuesday, adding that he wasn't aware if the
gathering had taken place. Twitter hasn't yet publicly commented on
its meetings. The firm's representatives met President Abdullah Gul
Tuesday afternoon. The president had previously breached the ban to
tweet his disapproval.
Ankara bought technology from the Netherlands to identify tax
losses stemming from Internet companies doing business in Turkey
without local offices, Mr. Simsek said. The government could even
consider sidestepping rules it adopted as a member of the
Organisation for Economic Cooperation and Development, or OECD, to
collect taxes, the minister said.
"There are some rules there that are limiting us, such as the
clause that a company pays taxes where it is headquartered. But if
a firm is transacting in a country through the cyber world, and
especially not setting up an office, this is unacceptable. We must
definitely tax them. " Mr. Simsek said.
The finance minister cited a Web giant that had been slapped
with a tax fine, and established an Istanbul office amid ongoing
court hearings, without naming the company.
Google Inc., which opened a Turkey office in 2006, has been
fined for not disclosing ad revenues and appealed the cases. The
Mountain View, California-based company's video-sharing website,
YouTube, was sporadically banned from 2007 to 2010, and has been
shuttered since Match 27 on national security grounds.
Twitter and YouTube had emerged as key platforms in leaks
damaging Mr. Erdogan's governing party in the lead-up to the March
30 local elections, which the premier swept with 46% national
support.
Meanwhile, the budget is on track to meet year-end targets, Mr.
Simsek said. The budget deficit for the first quarter was 1.5
billion Turkish liras ($707 million), supported by surpluses in
January and February even as the government posted a 5.1 billion
lira shortfall in March, Mr. Simsek said in Ankara. The
government's tax income increased 10% on the year in the first
quarter.
"We are at a very good point at the budget. We keep budget tight
to strengthen the central bank's hand to lower inflation," Mr.
Simsek said, reiterating the government's desire for a slowdown in
price increases that will also provide an incentive for
interest-rate cuts to support economic growth.
Turkey's $820 billion gross domestic product expanded at a
moderate pace in the first three months, but abating political
risks will provide a boost going forward, Mr. Simsek said.
Write to Yeliz Candemir at yeliz.candemir@wsj.com and Emre Peker
at emre.peker@wsj.com