Turkey woke up to a wave of price increases on the last day of the week, signaling a continued “tightening” in the country’s economic management, following the appointment of Mehmet Simsek as the finance minister and a return to orthodox economic policies.
Among the decisions published in the Official Gazette on Friday signed by the President Tayyip Erdogan was an increase in the Value Added Tax (VAT) applied to numerous goods and services. Accordingly, the 18% VAT rate on goods and services will be raised to 20%, while the 8% VAT rate applied to certain goods and services will be increased to 10%. The decision will come into effect on July 10, 2023.
Meanwhile, the fixed fees such as notary, passport, and visa expenses, have also been raised by 50%. Within this scope, fees related to the judiciary, land registry, residence and work permit, license, diploma, and traffic have been increased by 50%. However, driver’s license fees within the scope of traffic fees were exempted from the increase.
The “Mobile Phone Usage Permit Fee” for phones brought into the country by overseas passengers was also redefined and set at 20,000 TL. Previously, this fee was 6,091 TL.
How much to raise?
The government on July 5 submitted a bill to parliament to raise the lowest civil servant salary to 22,017 Turkish Liras ($843 on July 5) after government-run TÜİK had announced the six-month inflation rate as 19.77 percent in June. The ruling Justice and Development Party (AKP) parliamentary group chair Abdullah Güler announced that the civil servants receive a 17.55 percent increase plus 8,077 Turkish Liras per month.
Given the 3,7 million civil servants, the cost of the wage hike promised before the election is TL180bn.
A number of tax hikes including the VAT rate and corporate tax rate will be generating TL138,5bn in the remainder of the year, falling short of meeting the civil servant wage hike.