Turkey is close to edge of taxing limit, top boss says

A group of young people are enjoying their drinks on a street by the Istiklal Avenue, the center of entertainment in Istanbul, in this file photo. On Oct. 13, the Turkish government raised the special consumption tax on all alcoholic drinks along with mobile phones, cars and tobacco products. That added to the recent price increases in energy. DAILY NEWS photo, Hasan ALTINIŞIK

Turkey is nearing an edge in tax collection, Ümit Boyner, head of the Turkish Industry and Business Organization (TÜSİAD), has said, calling for major reforms that will reduce the warp in tax distribution and support low-income groups.

“The indirect taxes are easy to collect but every source of tax has a limit and we are getting closer to that,” Boyner said while she was speaking at a business meeting in Istanbul to discuss entrepreneurship and civil society on Oct. 14.

The government largely increased special consumption tax (SCT) on automobiles, alcoholic drinks, tobacco products and mobile phones on Oct. 13.

“We find the medium-term program announced by the government [on Oct. 13] very important for Turkey to dissociate with other developing countries,” Boyner said.

The mid-term program forecasts a sharp 4 percent fall in growth in 2012 and a staggered narrowing in the current account deficit.

The plan is open to discussion but is crucial as it would act as a point of bearing to provide more clear targets, according to Boyner.

“We sincerely support this effort will shape the coming three years in the economy. We will closely observe it with all of its rights and wrongs.”

The tax increase, which was released in the Official Gazette hours before the announcement of the medium-term program, has also been criticized by the main opposition party and some other groups.

‘Result of election economy’

Turkey’s current account deficit, which the government is trying to narrow through tax increases, is the result of the profligacy of the same government before the June 12 general elections, according to Faik Öztrak, deputy president of the Republican People’s Party (CHP).

The government has started to increase the taxes on electricity and natural gas along with mobile phones and automobiles, Öztrak said during a speech at the Turkish Parliament on Oct. 14.

He said the tax hike announced on Oct. 13 “stole billions of liras out of the pockets of people.”

Tax hikes in natural gas and electricity have caught Turkish people off guard, according to Ali Çetin, vice chairman of the Federation of Consumer Associations (TÜDEF).

The tax rates applied on alcoholic drinks, tobacco, fuel, automobiles and communication were already too high, Çetin told Anatolia news agency on Oct. 14.

Tax increases on new cars with engines over 1.6 liters will affect the price of 11 percent of cars sold, according to sales data for the first nine months of the year. About 89 percent of new cars sold in the period, or 366,526 units, had engines of less than 1.6 liters, the Automotive Distributors’ Association’s press office told Bloomberg in a telephone interview on Oct. 14. Turks either buy imported cars or obtain them from the subsidiaries of companies such as Fiat and Renault, which import nearly all parts.

Group warns Israel about Turkish ties

The Israel government should realize that the ongoing dispute with Turkey will have a heavy cost, according to Ümit Boyner, chair of Turkish Industry and Business organization (TÜSİAD).

“We hope Israel apologizes for what happened on the Mavi Marmara [ship] that it attacked on the open sea without any righteous reasons, meet the demands for compensation and lift the Gaza embargo,” she wrote in the latest issue of Görüş, TÜSİAD’s monthly magazine. “Those that govern Israel should immediately understand that agitating Turkey has a price.”

Turkey-Israel relations have been tense since the May 31, 2010, Mavi Marmara incident in which Israeli soldiers killed nine Turkish activists on the aid ship, which was bound for Gaza.

“I believe the Israeli government sees that people in Egypt and Jordan have hit the streets to demand Israeli diplomatic staff be removed from their countries just as Turkey has reduced its representation there to the second-secretary level. They should also consider the additional burdens of some other sanctions announced by Turkey once they are implemented,” she said.