PM unveils fresh tax cuts to boost demand

Hurriyet Daily News with wires

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In a speech at a party rally ahead of March 29 local elections, Prime Minister Recep Tayyip Erdoğan said the new stimulus package consists of cuts in sales tax on building purchases, furniture and machinery to 8 percent from 18 percent for three months. He said the Justice and Development Party, or AKP, government would take more steps if necessary.

"Our new package is composed of five articles, and for stimulating demand in the construction sector we cut the value-added tax to 8 percent from 18 percent in building sales for three months," Reuters quoted Erdoğan as saying.

The government would cut Value Added Tax to 8 percent from 18 percent in purchases of machinery in industry to encourage investments, he said. Erdoğan also said previous tax cuts on homes, cars and consumer durables helped lift sales and cited an improvement in the consumer confidence and manufacturer confidence indices as proof the measures are working.

"So far we have put into force 53 measures and we will implement new ones if necessary," Erdoğan said.

Meanwhile, Economy Minister Mehmet Şimşek said Turkey is seeking an IMF lending accord over 18 months to three years. The government is not planning to invite an IMF delegation for face-to-face talks on an accord until there is agreement on the fundamentals of the program, Şimşek said in an interview in Gaziantep in Southeast Anatolia. The parties still haven’t decided the details of how to tighten tax inspections, he said.
The government will invite an IMF delegation for face-to-face talks on an accord until there is agreement on the fundamentals of the program, Şimşek said in Gaziantep in Southeast Anatolia. The parties still haven’t decided the details of how to tighten tax inspections, he said.

The government is prepared to take additional measures to curb budget spending and has brought forward some expenditure to minimize the economic slowdown, he said. "If the fall in revenue carries on then as well as the budget, we will also review our borrowing plans," Bloomberg quoted Şimşek as saying. The budget deficit leaped to 7.4 billion Turkish Liras ($4.3 billion) in February as government spending soared ahead of elections. IMF funding may be used to finance some of the budget deficit as well as the current account deficit, Şimşek said.

Speaking in Eskişehir yesterday, Finance Minister Kemal Unakıtan said the government does not plan an extension on the three-month tax relief provided for some sectors. "The statements concerning such an extension are ungrounded," Anatolia News Agency quoted Unakıtan as saying.

When asked whether the government will grant 200 to 300 liras to the retired in an attempt to stimulate spending, the minister said he could not comment on this issue. "This is an issue of the Economic Coordination Committee, hence I am unable to tell whether it is on the agenda or not."