Plastic sector reeling from raw material tax

ISTANBUL- Hürriyet Daily News

The Turkish plastic sector is reeling from a recent decision to raise taxes on imported polyethylene and polypropylene. A Sept. 6 decision by the Cabinet will see tax on imported polyethylene and polypropylene hiked from the current 3 percent to 4.8 percent by the end of the year and then raised to 6.5 percent by the end of 2013. Plastic sector representatives are fuming as close to 87 percent of their raw materials are imported and this new tax will strip them of their export advantage, according to a statement released by the Turkish Plastic Industrialists Research, Development and Education Foundation (PAGEV).

The Turkish plastic sector is composed of more than 6,000 firms and ranks third after Germany and Italy in plastic production. In 2011, the sector registered $10 billion in exports to over 150 countries.

The decision is sure to harm the plastic sector and the country’s economy since a growing and producing plastic sector would contribute more to the Turkish economy, PAGEV Chairman Mehmet Uysal said in a written statement, adding that it is impossible to make sense of the decision. In 2011 the sector grew 11 percent and was predicting a 15 percent growth for this year, according to Uysal.

In 2011 Turkey imported $1.3 billion in polyethylene and 1.8 billion in polypropylene primarily from developing countries like Saudi Arabia, Egypt, India, Iran, Azerbaijan, Qatar, Thailand and the Ukraine.
Uysal said that the tax hike would lower the plastic sector’s profit margins as well as increase prices in the local market.

Polyethylene is used predominantly in the food packaging sector, while polypropylene is used in the textile, automotive, consumer durables, carpet and packaging sectors.