New tax hikes on the way

Taxes and fees were increased with a second set of regulations within the scope of government-initiated revenue-raising measures, which increased spending ahead of the election. A senior official said that further steps will be taken to reduce the budget deficit.

With today’s regulations there has been an increase in various taxes, especially the rise of two points in VAT, while rates have increased by 50 percent.

The tax increases continued just two days after the announcement of the bill that increased the corporate tax, doubled the annual tax for all vehicles once, and gave the president additional powers to increase the SCT.

HIGH-LEVEL AUTHORITY ANNOUNCED

A senior government official stated that it aims to correct the revenue side of the budget with today’s regulation, saying: “It aims to reduce the budget deficit. Some other steps will also be on the agenda. Measures are also planned to reduce costs. Due to the election and some previous decisions, a serious recovery in the budget is needed, ”he said.

The official stated that the transfer from KKM to the CBRT, including its cost, is based on the approach of increasing predictability in the budget, and that they will increase fiscal discipline.

The budget posted a deficit of 263.6 billion lira in the first five months of the year due to increased public spending ahead of elections in May and the cost of the earthquake that killed tens of thousands of people in February. In the first five months, expenses increased at almost twice the rate of income.

The budget had a surplus of 124.6 billion lira in the same period last year.

IMPACTS ON INFLATION AND MONETARY POLICY

Although it has been declining in recent months, inflation, which remains on its high trajectory, is expected to rise further due to tax and wage increases.

Despite the fact that inflation fell below 40 percent in May, after exceeding 85 percent last year due to the loose monetary policy followed by the CBRT, reaching a peak in 24 years, experts increase their forecasts of inflation, which they expect to rise in the next second half of the year. The year-end inflation forecast was above 50 percent in a Reuters poll before the tax hikes.

In the valuation published by QNB Finansbank, regarding the effect of the regulation on inflation, “We calculate that it will be around 1-1.2 points. It is estimated that approximately half of the effect on the CPI will be seen in the next month.

The market is closely watching whether the need for CBRT adjustment will increase after the tax increase, making fighting inflation a priority. Last month, the CBRT began gradually tightening its monetary policy to stem the deterioration in price action and raised interest rates for the first time in more than two years.

After the interest rate hike, which was well below expectations, the economic management announced that it preferred gradual increases in interest rates and normalization according to their risk analysis.

In his assessment of the impact of tax increases on monetary policy, Dynamic Investment chief economist Enver Erkan said: “Increases such as VAT, SCT, wages and exchange rates are negative and risky for governments. price balances. In terms of inflation, all cost factors must be kept in check and the exchange rate is the most important component here. The gradual transition that follows to current markets may remain relatively ‘dove’. More serious proactivity and front-loaded monetary policy tightening may be required here,” he said.

Economists had calculated that the corporate tax increase would generate more than TL 100 billion in revenue for the rest of the year, while MTV would generate approximately TL 40 billion in budget revenue. Economists estimate the impact of the VAT increase announced today at around TL 30 billion.

In the Oyak Investment note, it was noted that the tax increases could contribute about 2 percent to budget revenue.

The increase in the salary of the civil servants, which was included in the regulation of the Parliament two days ago, will create an expense of more than 120 billion TL for this year. Apart from these items, there are many changes in the law and regulations published in the Official Gazette that create income and expenses.

TAX INCREASES

In accordance with the regulations published in the Official Gazette, the 18 percent VAT section applied to goods and services has been increased to 20 percent and the 8 percent VAT section to 10 percent. The 1 percent VAT tranche, which mainly covers food, has not changed.

The banking and insurance transaction tax (BSMV) on consumer loans was also increased by 5 points to 15 percent.

In addition, fixed rates were increased by 50 percent. This increase includes fees collected in many areas, including passport, work permit, land registry and cadastre, mortgage, judgment, notary, jurisdiction, port of shipment, license and diploma fees, excluding driver’s license fees .

The fee charged for phones brought from abroad was increased by 228 percent to TL 20,000.

In addition, taxes on gambling have also been increased. (Reuters)