Varlık Vergisi ("wealth tax" or "capital tax") was a Turkish tax levied on citizens of Turkey in 1942, with the stated aim of raising funds for the country's defense in case of an eventual entry into World War II. However, it is accepted that the underlying reason for the tax was to inflict financial ruin on the minority non-Muslim citizens of the country, terminate their prominence in the country's economy and move the assets of non-Muslims into the hands of the Muslim bourgeoisie. It can be defined as the last application of the jizya (cizye) tax on non-Muslims in Turkish history, and the only such application after the establishment of the constitutionally secular Turkish Republic in 1923; breaching the articles regarding secularism and citizen equality in the Turkish Constitution.
The bill for the one-off tax was proposed by the Şükrü Saracoğlu government, and the act was adopted by the Turkish parliament on November 11, 1942. It was imposed on the fixed assets, such as landed estates, building owners, real estate brokers, businesses, and industrial enterprises of all citizens, but especially targeted the minorities. Those who suffered most severely were non-Muslims like the Jews, Greeks, Armenians, and Levantines, who controlled a large portion of the economy, though it was the Armenians who were most heavily taxed.
The tax was supposed to be paid by all citizens of Turkey, but inordinately higher rates were imposed on the country's non-Muslim inhabitants, in an arbitrary and predatory way. Because those forced to pay the bulk of the taxes were exclusively non-Muslims, the law was perceived by the public as a "jizya - kafir tax" against them. These taxes led to the destruction of the remaining non-Muslim merchant class in Turkey, the lives and finances of many non-Muslim families were ruined. In addition, the law was also applied to the many poor non-Muslims such as drivers, workers and even beggars, whereas their Muslim counterparts were not obliged to pay any tax.
The Varlık Vergisi resulted in a number of suicides of ethnic minority citizens in Istanbul.
During World War II, Turkey remained neutral until February 1945. Officially, the tax was devised to fill the state treasury that would have been needed had Nazi Germany or the Soviet Union invaded the country. However, the main reason for the tax was to nationalize the Turkish economy by reducing minority populations' influence and control over the country's trade, finance, and industries.
The tax could not be challenged in court. Non-Muslims had to pay their taxes within 15 days in cash. Many people who could not pay the taxes borrowed money from relatives and friends, also sold their properties at public auctions or sold their businesses to gather some money to pay. People who were unable to pay were sent to labor camps in eastern Anatolia. Workers were paid for their service but half of their wages were set-off for their debts. Because of the hard plowing work on Kop Pass, elder obligors conspired with young villagers from Aşkale to make them work instead and they paid villagers daily wages in return. Five thousand were sent there and all were non-Muslims, since the Muslim taxpayers who failed to pay received lighter sentences. Also, there were easiness for payments and tax discounts for the Muslims taxpayers. Although the law stipulated that people over fifty-five years old were exempt from labor service, elderly men, even sick people were sent there. Twenty-one of the people who were sent to the labor camps died there and the Turkish government usurped their wealth and sold it to Turkish Muslims at extremely low prices, paving the way to the creation of some of the contemporary Turkish conglomerates.
The state also confiscated the property of the taxed person's close relatives (including parents, parents-in-law, children, and siblings) and sold it to settle the tax amount, even if the person had been forced into labor service.
Foreign-passport residents in Turkey who gave in a tax return or owned a business were forced to pay a huge capital levy on supposed wealth too. However, none of them were ruined or committed suicide. The tax was not based on any reality, but just on a whim of the authorities. This provoked the intervention of foreign embassies and consulates on behalf of their nationals.
Taxpayers were classified into four separate lists, the M list, for Muslims, the G, for non-Muslims (Gayrimuslim), the E, for Foreigners (Ecnebi) and the D for converts (Dönme).
The rigidly-enforced, discriminatory law did not yield the results the government had hoped for. Companies increased the prices of their products sharply to recoup their losses, creating a spiral of inflation that ruined low-income consumers.
However, according to official information, the Turkish government collected 324 million liras (at a time when 1 US dollar was equivalent to 1.20 Turkish lira) through the confiscation of non-Muslim assets. The press allegedly had "anti-minority" articles and reports.
According to T.C. Resmi Gazete, the official journal of Turkey that publishes the new legislation and other official announcements, the Varlık Vergisi (Law #4305) was not applied to any particular ethnic or religious communities. Tax tariffs were determined one by one for every business sector. According to the T.C. Resmi Gazete, the tax tariff of 4.94% was for the large-scale farmers, and not limited to any particular religious community. It was also indicated that the tariff for the large-scale farmers could not exceed 5%.
The law could not sustain relentless international criticism. Under pressure from the United Kingdom and the United States, it was repealed on 15 March 1944. After the abolition of the law, the minority citizens who were at the labour camps were sent back to their homes. The Turkish government promised to give back the paid taxes to non-Muslims, but this did not happen.
The opposition Democratic Party (DP) capitalized on its unpopularity in the general election of 1950, which was the first democratic general election in the Turkish Republic, thereby achieving a landslide victory against the Republican People's Party (CHP).
These taxes brought about a permanent demographic change within the minority population. Many people of the minorities, especially the Greek minority, felt that there was no future for them in Turkey and they left their ancestral homes and became refugees in Greece. On the other hand, some, especially from the Jewish community had managed to secrete assets abroad and they were able to restart a reduced and hesitant life in Turkey. The tax also resulted in state confiscation of much minority property in Istanbul, "Turkifying" not only the economy but also the landscape. The 1935 Census records non-Muslims as 1.98% of the population; by 1945, this had fallen to 1.54%.
In addition, the Varlık Vergisi once more demonstrated that being Muslim constituted a significant part of the definition of citizenship in Turkey.
The Varlık Vergisi in the way it was dealt with by the Turkish Press exemplifies the close relations between the Executive and the Press, in Turkey.
Years after the introduction of the Varlık Vergisi, the political elite of Turkey had difficulties coming to terms with the subject. The historical novel Salkım Hanım'ın Taneleri (variously translated as Mrs. Salkım's Diamonds/Pearls/Beads/Necklace), written by Turkish author Yilmaz Karakoyunlu, recounts stories and witnesses of the non-Muslims during the Varlık Vergisi. The novel was soon turned into a film of the same name, Mrs. Salkım's Diamonds. Members of parliament, such as Ahmet Çakar (MHP), were outraged at the screening.