ADDITIONAL TAXES TO SUPPORT BUDGET BALANCE
Due to the recession in the economy, tax revenues falling short of budget forecasts have paved the way for new taxes and similar duties to support the government budget, with more such changes expected to come in the months ahead.
Dear Fortune readers, in this article, I would like to share my evaluations on this recently implemented series of taxes and similar duties.
As a result of the ongoing recession and a string of elections, Turkey’s central government budget posted a deficit of 78.6 billion liras in the January-June 2019 period, reaching total forecasted expenditures for 2019 in the first six months, and this result fueled certain changes to reduce the deficit. These changes began in January and were followed by further arrangements in almost every subsequent month in a highly consistent manner. For instance, in January, a new tax of 15% was levied on payments made to online advertisers and agencies. In March, tax on interests from forex deposit accounts as well as profits from forex participation accounts in participation banks saw an increase of 2 points, affecting current and call accounts between six months and one year, and time deposits of more than a year.
April saw an amendment to the Environment Law that introduced a reclamation fee for plastic and other waste material. This brought the obligation to declare and pay 15 kurus for each plastic bag. In May, tax on current and call accounts and time deposits up to and including six months was increased from 5% to 15%, on time deposits up to and including a year from 3% to 12%, and on time deposits of over one year from 0% to 10%. A one per mille Banking and Insurance Transactions Tax was introduced to foreign currency trading, but this was subsequently reduced to 0% in June for exchanges by enterprises with industrial registry certificates as well as exporters that operate under exporters’ associations.
Another change in May was the removal of the customs duty exemption for inbound e-commerce goods with declared value of up to 22 euros arriving by post or express mail. In July, registry fee for telephones purchased abroad and brought into Turkey by international passengers increased from 618.50 to 1,500 liras, and departure fees rose from 15 to 50 liras. Furthermore, certain tourism, accommodation and food & beverage venues, private airport and terminal operators and tourism agencies will be obliged to pay from 7.5 per ten thousand to 7.5 per thousand of their net sales and lease revenues as Tourism Share, effective October. These new duties, as well as other changes reported by the media, such as the increase in income tax rates at the highest bracket from 35% to 45-50% and the introduction of additional taxes for luxury residences, are expected to pass into law this fall.
As a result, I would like to remind that we expect the government to implement additional taxes and other duties in the coming months, as part of the measures being taken in support of its budget balance.