Turkey welcomes new year with tax hikes as cigarette prices jump

Turkey welcomes new year with tax hikes as cigarette prices jump

ISTANBUL - Hürriyet Daily News
Turkey welcomes new year with tax hikes as cigarette prices jump

A pile of seized cigarettes from smugglers are displayed at a police station. Cigarette companies claim that hikes in prices encourage smugglers. DHA photo

Philip Morris has become the first company to announce cigarette price hikes after recent tax hikes introduced by the Turkish government.

Tobacco producer Philip Morris/Sabancı announced yesterday an increase of one Turkish Lira in the retail prices of all their products regardless of their previous prices. With the hikes, the price of a pack of cigarettes that had cost eight liras is now nine liras, while a pack that had previously cost five liras will now be six liras.

Another tobacco company, British American Tobacco (BAT) revealed they are set to increase their prices as well within a week. “Because the tax hike is not too much, cigarette prices won’t increase much either. While we haven’t made a decision, it won’t be around 20 to 30 percent as it was thought before,” Rıza Tuna Turagay, the BAT Turkey corporate communications director and a board member, told daily Star.

The government yesterday announced that the graduated state tax rate on one pack of cigarettes will rise to 81.6 percent from 80 percent. With the change, the amount of state tax on an 8-lira pack increased to 6.53 liras from 5.22 liras.

The Finance Ministry also revealed the change of the value added tax (VAT) rate on real estate. After the changes, for houses under 150 square meters with a value of 500 to 1,000 liras per square meter, the tax will be 8 percent, while it will be 18 percent for houses worth over 1,000 liras per square meter. The VAT for houses over 150 square meters will remain unchanged at 18 percent.

The government has spoken about their intention to increase taxes on the rich for some time. With this change, not only the area of the property, but also the price value of the property will be a VAT determinant. Those who buy high-value houses will pay higher taxes.

This regulation targets luxury or first-class residential areas in metropolitan municipalities, excluding urban renewal and reserved areas as well as buildings with disaster risks.

Hike stream

As the new year began, the government introduced hikes on many other goods and services as well. The tax on motor vehicles increased, so citizens are to pay taxes ranging between 56 liras to 18,803 liras.

The fee for mobile phone subscriptions was also raised, from 37 liras to 39 liras in addition to increases in the fees for obtaining many state documents including national identity cards, passports and notary documents.

New VAT code irks property developers


A new Value Added Tax regulation in the housing sector shifts the heart of the tax from the size of the assets to their value, which has irked some property developers.
Sector representatives from Ankara are concerned that small houses might lose their attractiveness as a financial investment instrument in the long-term, despite generally agreeing that around 100,000 houses licensed prior to the introduction of the new regulations in the province will heat up the sector in the short term.

The cost per square meter of real estate properties in Ankara and Istanbul is usually over 1,000 Turkish Liras because of the high costs of land and construction in metropolitan cities. “For a 200,000 lira house the VAT will be 38,000 liras,” said Real Estate Projects Investment Management chairman Barış Aydın Barışkent.