How will the increases in the SCT and VAT affect inflation?

With the effect of the increase in fuel taxes on cigarettes and the new depreciation of the TL after the elections, economists, who expected a 10 percent increase in consumer inflation (CPI) in July, revised upwards. your year-end forecasts.

With the strong increase in the special consumption tax (SCT) on fuels, the pump price increased more than 20 percent this weekend, while economists expect a strong rebound in the CPI in July and August.

Economists note that it is inevitable that year-end CPI forecasts will be revised by 50 to 60 percent, perhaps even more, and they expect an upward impact on CPI for at least the rest of the year, along with spillover effects. the increase in fuel prices and others.

MONTHLY CPI MAY SEE 10 PERCENT IN JULY

Four economists, referred to by Reuters for their calculations, estimated that the CPI for July could rise between 9 and 11.5 percent. As some increases were made in the middle of the month, as in the case of fuels, the effect will also extend until August.

As a result of the economic policies implemented before the elections and due to the rising costs caused by the earthquake, the government is taking measures to increase revenue one after another. In this context, the president was given the authority to increase the excise tax on fuel five times. Said amounts of the SCT will be reviewed twice a year.

Economists said it will make a major upward revision to its year-end forecast. Before the tax increases, economists had expected the CPI level of 38.21 percent seen in June to be the lowest level seen this year, with the CPI rising above 50 percent again by the end of the year.

With the bag law passed in Turkey’s Grand National Assembly last week, increases were made to corporate tax, VAT and BITT, and fees were also increased, which were introduced to the single MTV.

INCREASES MADE TO REDUCE FINANCIAL DISCIPLINE CONCERNS

The bankers said they were not surprised by the increases in exchange rates, interest rates and taxes, as a result of the policies implemented before the elections and the increase in expenses due to the earthquake.

As a result of the SCT increase, three economists estimated that tax revenue in the budget would increase by 20 billion lira per month, by 100 billion lira for the rest of the year, and by 250 billion lira next year.

“Our calculations for the budget show that steps have been taken to largely ensure fiscal discipline after the earthquake,” said a bank treasury manager. The same banker said that only steps were taken to increase the spending of the pre-election budget, and with those steps it was intended to remove budgetary discipline from being a question mark for investors by 2024 after the earthquake. (Reuters)