Reuters: Banks want to get involved in inflation accounting
Banks, which, according to Minister of Treasury and Finance Mehmet Şimşek, would not be included in inflation accounting, are considering negotiating with the Treasury to apply inflation accounting to their own balance sheets so as not to be assessed for profits.” unreal” in the face of high inflation.
Three senior bankers close to the matter told Reuters they expect banks’ profits to more than half after accounting for inflation, and that banks should engage in the practice, which is why a meeting with the Treasury.
One banker said: “The banks want to implement it. “A meeting is planned with the Treasury on this issue… Banks made profits in a high inflation environment and must pay taxes for it,” he said.
Inflation accounting, which will be implemented after high inflation in Turkey, which has reached more than 85 percent in the last two years, aims to correct the deterioration caused by inflation in companies’ financial statements.
Şimşek said last week that inflation accounting will be implemented next year, but financial institutions may not be included.
WILL AFFECT THE TAX BASE
While Turkey, which has experienced a period of high inflation in the past two years, is preparing to return to using inflation accounting at the end of 2023 after a gap of about 20 years, companies that draw on non-assets monetary and have high debts. They are expected to be profitable in this process.
The gain or loss resulting from accounting for inflation will affect the tax base in 2024 and beyond, and during this period, the inflation adjustment may have an increasing or decreasing effect on the tax base in sectors and companies.
Another banker said: “If inflation is taken into account, profits decrease by more than half. “Some banks may even declare losses,” he said.
The Turkish Banks Association (TBB) did not comment on Reuters’ question on the issue.
EMPHASIS ON ‘THE GOVERNMENT’S NEED FOR TAX REVENUE’
After the election, the government raised taxes to meet financing needs that arose after the February earthquakes and to increase the Treasury’s cash reserve. While the corporate tax for non-financial institutions was increased to 25 percent, this rate was increased to 30 percent. for financial institutions, including banks.
Another banker stated that the reason banks are excluded from accounting for inflation is the government’s need for tax revenue.
While inflation exceeded 85 percent in October 2022, the Turkish banking sector announced historic profits in this environment, and the sector’s net profit increased by 366 percent to 433.46 billion lira at the end of 2022. The Net profit of the sector in the January-September period increased by 53.5 percent compared to the same period last year, reaching 439.7 billion lire. (REUTERS)
Source: Sozcu
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.