Turkey wakes up to tax hikes

ANKARA

AFP Photo

Headaches for many Turkish citizens waking up after a night of New Year’s revelry were compounded on Jan. 1 by the realization that daily goods such as fuel, cars, cigarettes, alcoholic drinks and mobile phones had all gone up in price with the turn of the calendar.

The government increased special taxes on the goods a day after announcing a 5 percent hike in the minimum wage for workers.

The Finance Ministry announced it would ramp up a number of fees it collects, including the private consumption tax (ÖTV), implemented on tobacco products and value added tax (VAT) by 3.93 percent. The ÖTV share in auto prices that used to vary between 40 and 130 percent rose to between 45 and 145 percent.

Accordingly, normal cars could cost upward of 3,000 Turkish Liras more, with luxurious cars being subjected to even higher price hikes. Market analysts said the difference in the luxury car price may be around 7 to 8 percent, meaning a high-end car currently selling for 135,500 liras might climb to around 145,000 liras.

Diesel fuel prices also rose nine kuruş yesterday, increasing the price of a liter of diesel in Istanbul to 4.63 liras, an all-time record. As a result of the increase, the gap between diesel and gasoline – which is selling for 4.96 liras – has significantly narrowed. Three liras of the five-lira price are taxes.

After a raise imposed on fuel prices, Turkey has become the mainstream economy with the most expensive gasoline in the world.

The government also introduced 57 kuruş in tax hikes on a box of cigarettes, meaning the total tax collected per box will jump from 3.31 to 3.88 liras.

The hike introduced by the ministry will also hamper cigarette companies’ “price reduction” trick to raise their market shares.

A number of tobacco companies had slashed their prices by remarkable amounts ranging between 50 kuruş and two liras in November 2013, decreasing the price of cheapest cigarette to five liras.

Sector representatives said the hike would add to the tax burden on tobacco products, arguing there will no longer be any cigarette under six liras on the market following the government’s move.

Alcoholic beverages were another target of the government, as the ÖTV tax collected from beer rose by 15 percent and 10 percent for rakı.

Authorities say all alcoholic beverages may be affected by price hikes of between 10 and 15 percent with the tax rise.

On Dec. 31, 2013, the government announced the net minimum wage in the country would rise 5 percent to 846 Turkish Liras in the first half of 2014. Another raise of 6 percent will follow in the second half, bringing the total amount to 891 liras ($428).