Turkey is desperate to cut her budget deficit, to increase confidence among global funds and slow down domestic demand to help the Central Bank with disinflation. In summer months, rumors of next taxes led to a riot in the social media, which forced the administration to tax consumption by stealth and piece meal legislation. A new bill backed by lawmakers from the ruling Justice and Development Party (AKP), proposing several changes related to the defense industry and various other laws, has been submitted to the parliament immediately after it opened its fall-winter session on 1st of October.
While VP Cevdet Yilmaz swears that “not a penny” of news taxes will go the budget, (they will be transferred to Defense Industry Support Fund), which is disingenuous, because the Fund is bankrolled by the general budget, if military expenditures need to be increased.
Why does Turkey need to increase defense expenditures? Because Erdogan believes that an Israeli attack on Anatolia is imminent. We kid you not!
Let’s get back to the proposed legislation:
The proposal includes adjustments to tax regulations, motor vehicle taxes, and the introduction of a “defense contribution fee” for some goods and services.
Amendments related to the defense contribution aimed at increasing the resources of the Defense Industry Support Fund (SSDF). The contribution will be calculated based on several types of tax declarations.
The proposed bill would impose a contribution equivalent to the stamp duty on tax, customs, and social security levies. For annual income tax returns, the contribution would be half the amount of the stamp duty.
In addition, a fee of 750 lira will be collected from both the buyer and seller in property transactions handled through title deed and land registry offices. For other transactions, the individual involved will be charged 375 lira.
For credit cards with a monthly spending limit of 100,000 lira or more (~2,915 US dollars), cardholders will be required to pay an annual contribution of 750 lira per card.
The proposal also introduces new fees for notary services. When notaries handle property sales, a fee will be charged, along with a 3,000 lira fee for the first registration of new vehicles. For the sale or transfer of already registered vehicles, a fee of 1,500 lira will apply, while other transactions requiring a notary will carry a 75 lira fee per transaction.
On Saturday, Turkey woke up to a second batch of new taxes:
A Special Consumption Tax will be collected from wristwatches and drones costing more than 5 thousand TL. It has been announced that Special Consumption Tax will also be collected from drones used for non-military purposes. Media also reports taxes on imported toys, though this needs to be confirmed.
President Erdogan has successfully spread the idea that Israel is about to attack Anatolia, which resonates with Turkish voters. The new taxes and surcharges are presumably to beef up defense spending in case of an attack.
However, Erdogan’s campaign to persuade Turkey that an attack from Israel is imminent serves two other important purposes. First, he and nationalist partner Bahceli use the threat as an excuse to reach out to the formerly outcast Kurdish political party DEM, to legislate a new constitution, which will incidentally grant Erdogan another term in the presidency. Secondly, the threat perception makes it easier to justify new taxes, and soon probably new “security measures” to stifle the opposition and dissident media.
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