Tax rises will boost Turkey’s defense: Finance Minister Ağbal
Many new tax measures introduced by the Turkish government aim to boost defense spending amid increased geopolitical risks, Finance Minister Naci Ağbal said on Sept. 28.
“Many tax rises will be transferred directly to the defense industry fund, as the fund is not a part of the central government budget,” Ağbal said in a speech at the Istanbul Financial Summit, state-run Anadolu Agency reported.
The government on Sept. 27 announced new tax measures, which aim to add 28 billion Turkish liras ($8 billion) to the revenue budget in 2018, in line with the Medium Term Program (MTP). The program targets an annual growth rate of 5.5 percent for 2018-2020.
The government will raise the motor vehicle tax on passenger cars by 40 percent.
According to the measures, the government will allocate an additional 8 billion Turkish liras ($2.32 billion) of existing revenues to defense spending.
Ağbal said that the defense industry’s share in income and corporate taxes will be increased to 6 percent from the current level of 3.5 percent through the new measure.
“We are working on a new legal regulation that will provide basis for allocating part of motor vehicle taxes directly to the fund,” he added.
The government will also increase the financial sector’s corporate tax rate by 2 percentage points to 22 percent in line with the new economic plan.
The minister said the country’s financial sector was “strong and resilient enough to pay these new taxes.”
Turkish bank stocks saw sharp losses late on Sept. 27 just after the government unveiled new taxes on the finance sector along with automotive stocks.
[HH] ‘Tax cuts on strategically key sectors’
Ağbal also said the government would decrease corporate taxes in a number of key production sectors of strategic importance.
“We are working on this tax plan,” he said, adding that work on revising the country’s value-added tax scheme is also underway.
“Turkey’s real sector has long had an eye on this key reform step and we are about to complete our works in this field. We’ll soon launch a new VAT plan that will give relief to the real sector,” Ağbal added.
He said the Finance Ministry is also working on a reform that will combine income tax and corporate taxes.