Turkey targets luxury cars with hike in special consumption tax

ANKARA - Reuters

REUTERS photo

Turkey increased its special consumption tax on cars on Nov. 25, a move that will be applied to all but the cheapest models in what the finance minister said was a response to demands from the industry.

Speaking to reporters in Ankara, Naci Ağbal said that no increases would be applied to cars that cost less than 40,000 Turkish Liras ($11,578). Models costing 40,000-70,000 lira would see a price rise of around 3 percent, he said.

The change, which Ağbal said would contribute around an additional 3 billion lira to the budget, is seen as potentially positive for sales of mass-market cars made in Turkey as it would drive up the cost of luxury competitors, many of which are imported.

“The goal is not to obtain revenue, it is to amend the system’s broken structure and move to a just and new taxation system,” Ağbal said.

Under the current system, imported luxury cars with smaller engines are in the same tax bracket as mass-market models, many of them made in Turkey by firms including Toyota and Renault, or Ford Otosan and Tofaş, local joint ventures with Ford and Fiat.

The new system will make even smaller-engine luxury cars more expensive.

The changes will not be welcomed by car importers including Doğuş Automotive, which sells brands including Volkswagen, Audi and Bentley in Turkey.

“New taxes for higher-priced cars are negative for premium car sales and Doğuş could take a hit,” Oyak Securities said in an e-mailed note.

“For Ford Otosan and Tofaş, the negative impact would be softer as passenger car domestic sales have a smaller share in their total sales and light commercial vehicle tax rates will stay unchanged,” it said.

Ford Otosan and Tofaş both export models produced in Turkey as well as supplying the domestic market.