High taxes burden textile exporters

ANKARA - Reuters

Employees work at a textile facility in Istanbul. The sector is posting a high foreign trade surplus, says a professional. DAILY NEWS photo, Hasan ALTINIŞIK

Additional taxes imposed recently on the Turkish ready-to-wear industry have increased sector costs, causing a significant decline in the exports volume in the last four months, according to top executives of retail associations yesterday.

“Fabric weaving material prices rose 20 percent, pushing overall costs up by 30 percent since November last year,” said Yılmaz Yılmaz, the head of United Brands Association, at the Ready-to-wear and Confection Platform meeting in Istanbul.

Due to the tax hike in June, ready-to-wear exports declined by $700 million in the last four months, said Yılmaz. According to him, the rising costs will also increase domestic consumer prices, with a definite effect on the inflation rate in the first months of next year.

“Cotton prices have a share of 55 percent in our general cost of production,” Yılmaz said. The increased taxes on cotton have harmed the competitiveness of the country in exports markets, according to Hikmet Tanrıverdi of the Istanbul Ready-to-Wear and Apparel Exporters’ Association (İHKİB).

The Turkish government increased the tax on textile product imports to 20 percent and confectionary imports to 30 percent, excluding imports from European Union countries, with a new regulation in June. “The additional tax increase was aimed at combating the current account deficit in the country,” Tanrıverdi said during the Ankara meeting.

Turkey’s textiles industry is among the top sectors posting a high foreign trade surplus, he said. The ready-to-wear sector nearly had a 1 percent share of the country’s imports, while the share in exports has jumped to 13 percent as Turkey’s total export of ready-to-wear reaches $16 billion, he said. Weaving fabric imports reached $2.1 billion in first 10 months of this year.

Foreigners on the run
“Global firms have reduced the purchase volumes due to additional taxes,” said Tanrıverdi, claiming the annual target of $17 billion in ready-to-wear exports could not be reached as a result. “Due to the additional taxes, we will close the year with a total $16 billion in ready-to-wear exports,” Tanrıverdi said.

Cem Negrin, head of Turkey’s Ready-to-Wear Industrialists Association (TGSD), also said the large purchasing groups from the leading international brands have started to pull out of the Turkish market due to increasing production costs reflected in prices.