Ministry of Treasury and Finance’s Authority to Block Access is Revoked

Law No. 7194 on Digital Service Tax and Amendments to Certain Laws and Decree Law No. 375 (Law) introduced new taxes such as digital service tax, accommodation tax, and luxury housing tax. The Constitutional Court (Court) found certain provisions of the Law related to their taxes unconstitutional in its decision E: 2020/11, K: 2023/98 dated 18 May 2023 (Decision) following an application to the Court. Decision was published in the Official Gazette on 12.09.2023. Decision particularly highlighted assessments related to the Digital Service Tax. We have summarized it briefly below.

Article 7/2 of the Law had regulated that in case digital service taxpayers fail to submit the declarations and fulfill their payment obligations related to taxes falling under the Tax Procedure Law within the specified deadlines, the Ministry of Treasury and Finance (Ministry) could block access to the services provided by digital service providers until these obligations were met.

As the grounds for the cancellation request, it was alleged that essentially, it imposed a form of indefinite closure penalty which involves blocking access to the services offered by digital service providers who fail to fulfill their obligations. It was also emphasized that applying a sanction to digital service taxpayers that is not applied to the same taxpayers for other taxes and is not valid for all other taxpayers is contrary to the principle of equality. Furthermore, it was stated that the decision to block access to the services provided by digital service providers violates the freedom of communication, as it is required to have a court decision in accordance with the reasons and procedures specified in the Constitution in order to restrict communication. In this context, it is argued that the provision interferes with the freedom of expression and dissemination of thought, and for these reasons, it is claimed to be contrary to the principles of “equality” stipulated in Article 10, “proportionality” stipulated in Article 13, “freedom of communication” stipulated in Article 22, and “freedom of expression” stipulated in Article 26 of the Constitution.

Court evaluated this provision in the context of proportionality and the principles of freedom of work outlined in Article 48 of the Constitution. The Court stated that blocking access would impose significant restrictions on the operations of digital service providers, potentially resulting in serious commercial and economic losses for business owners. Furthermore, the Court emphasized the widespread use of the internet in daily life, its indispensable role in ensuring communication, and its significance as one of the most important channels for conducting economic and commercial activities in the digitalization process. In this context, Court emphasized that the sanction of blocking access should not impose an excessive and unbearable burden on business owners. For these reasons, Court found the relevant provision of the Law to be in violation of Article 13 and Article 48 of the Constitution.

In light of the above reasons, Court canceled the authority of the Ministry to block access to digital service providers, and this cancellation will take effect 9 months after the publication of the Decision in the Official Gazette.

You can access the full text of the Decision here (only available in Turkish).