The fate of the alcoholic beverages market for 2020 will be determined by the Special Consumption Tax hike decision in July. In the last 2.5 months, the liquor sector has shrunk by half. The pandemic also changed the dynamics in the liquor industry. While the liquor market has shrunk by 40 to 50 percent in the quarantine for the past 2.5 months, the State’s SCT income in this area has also dropped by 10 percent for the first time since February 2019.
While the sector is advancing the normalization process with full solidarity, the average 20 percent increase in liquor sales in liquor stores and market chains has shifted to upper segment products with categories such as raki, wine.
Before the pandemic, the SCT levied on alcohol increased by 34 percent in January-March. One of the biggest reasons for this is that the SCT was not increased in January. There was an increase in tax revenues because the state did not increase the SCT in January. Sales increased or did not decrease, so tax revenues rose.
Turkey’s Islamist President Erdogan has recently promised “to tax the hell out of alcohol and tobacco products”, to discourage consumption, and in the mistaken belief that SCT increases will help the Treasury’ empty coffers. Little does he know about the Laffer Curve. Turkey had long ago reached the declining slope end of the said curve, with rapidly increasing market share of smuggled products, as well as the emergence of vibrant micro-brewery and distillery business. Turkey has become the land of moonshiners.
In Rakı, interestingly, there was a tendency towards higher segment products. The reason for this is that higher segment products are sold at Tekel dealers at a more affordable price than general purpose sales points. Due to people’s future concerns, a certain segment turned to more affordable products. There is also a trend towards the liquor segment that is drunk with food like wine, they have increased their percentage.
There are approximately 4000 raki-oriented restaurants across Turkey. Some 2500 of them are taverns.
The alcoholic beverage industry and restaurants, collecting most of their profits from sale of alcohol, rather than food, aren’t only ones suffering. Turkey’s unique “kıraathane” or “kahvehane” industry, which entirely consists of mall shops offering non-alcoholic beverages and card and board games is also going hungry. These small café shops were allowed to open their doors, with the proviso that games of chance and skill remain forbidden. Many patrons attend these venues to enjoy a thick cup of Turkish coffee, as well as playing a friendly card game for a small wager, don’t visit them anymore.
Covid-19 restrictions are bad enough for Turkey’s once vibrant service industry, but those enforced with an Islamist objective, make live unbearable.
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