Budget gap widens, new taxes become more likely

ISTANBUL - Hürriyet Daily News

An unidentified man walks among cars for sale at an auto market in Istanbul. The Finance Ministry plans to increase tax on cars along with several other items. DAILY NEWS photo, Emrah GÜREL

The budget balance produced a deficit of 8.5 billion Turkish Liras in the first eight months of the year, reinforcing concerns that the government will agree on tax hikes to increase revenues. The same period last year saw a budget surplus of 2.1 billion liras.

Budget revenues in the first eight months increased 10.8 percent to 220.5 billion liras, while budget expenses increased 16.3 percent to 229 billion liras. Budget expenses excluding interest payments shot up by 16.7 percent reaching 192.7 billion liras. Tax revenues amounted to 182.2 billion liras, posting a 7.5 percent year-on-year increase in the first eight months.

‘Corrective measures’

The budget recorded a drop in primary surplus in the same period. The figure was 27.7 billion liras in the January-August period of this year, compared to 33.8 billion liras in the same period last year.
“There has been an improvement in the pace of tax revenues, while primary expenditures
[expenditures excluding interest payments] recorded some slow down. The 12-month cumulative primary balance and budget deficit signals the poorest performance in the last 15 months. That’s why it is likely that at least some of the corrective measures regarding revenues that appeared in the press recently will be enacted in the last quarter,” Levent Durusoy, the chief economist at Yatırım Finansman Securities, told Anatolia news agency yesterday.

The Finance Ministry prepared a draft law that would introduce new tax hikes focused on automobiles, tobacco products, real estate investment trusts and title deed fees after Finance Minister Mehmet Şimşek said that his year’s budget targets will not be met.

Turkey is very likely to miss its budget deficit target of 1.5 percent of national output this year as growth slows and tax revenues fall due to weak domestic demand and a slowing economy, Şimşek had said in early September.

The government has to submit the 2013 budget to Parliament by Oct. 17.

The developments in the budget data continue in parallel with the slowing economy, Fatma Melek, the chief economist at Akbank, told Anatolia, adding that regional tensions hamper confidence. “All these factors put downward pressure on economic activities and tax revenues,” she said.