ISTANBUL (Reuters) – Turkey on Friday raised value added tax (VAT) by two percentage points for some commodities and for goods and services, a hike that is expected to boost already high inflation and boost fiscal revenue .
The official gazette said on Friday that the rate of VAT applied to goods and services had been reduced from 18% to 20%, while that applied to certain basic products such as toilet paper, detergents and nappies, had increased from 8%. at 10%.
In addition to these immediately applicable announcements, there is an increase in the tax on consumer loans, which goes from 10% to 15%.
Registration fees for mobile phones imported from abroad have also been increased by 228%, from 6,091 lire to 20,000 lire (704 euros).
Inflation in Turkey fell below 40% year on year in June, but is expected to rebound in the coming months, supported by rising wages and a package of fiscal measures including a tax hike on companies.
These new measures should raise headline inflation by 1 to 1.2 points, according to a note from QNB Finansbank.
To cope with runaway inflation, Turkey’s central bank raised interest rates last month and pledged to tighten policy further, marking a reversal after years of unorthodox monetary policy.
According to economists, the VAT hike could boost state revenues by around 30 billion liras, burdened by the consequences of this year’s earthquakes and spending before the elections.
The tax increases could boost Turkey’s budget revenue by around 2%, according to a note from Oyak Investment.
The moves come after a bill was introduced in parliament earlier this week that aims to raise corporation tax from 20% to 25% to meet earthquake-related financing needs, which killed more than 50,000 people. The earthquakes have caused more than 100 billion dollars in damage, according to estimates by the government, industrialists and economists.
Separately, Turkey on Friday also exempted from withholding tax dividend payments for its own shares of the Istanbul Stock Exchange.
(Report Ezgi Erkoyun, Burcu Karakas, Corentin Chapron, edited by Blandine Hénault)
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