10 July 2023 VAT standard rate increases from 18% to 20%
Turkey has gazetted on 7 July 2023 a 2% increase in its VAT rate from 10th July 2023. The reduced VAT rate will also increase from 8% to 10%. The 1% reduced rate on newspapers and journals; foodstuffs will remain unchanged.
The Value Added Tax increase comes with a rise in the bank consumer loan charge – Bank Insurance and Transaction Tax (BSMV) – from 10% to 15%.
Economy in turnaround
Following the re-election last month of President Erdogan, there have been a set of radical austerity measures to avert rocketing inflation and collapse of the currency. This was caused by the global economic slow down, unusual economic polls and the recent earthquakes. In June, the central bank lifted the country’s key interest rate from 8.5% to 15%, and affirmed that there will be further gradual monetary tightening until the inflation situation in the country improves. The President has now replaced many of the key finance ministers from the last regime with fiscal hawks.
Turkey’s trade deficit contracted by 35 per cent in June as both imports and exports declined in a sign that economic activity may be slowing as President Erdoğan returns to more orthodox economic policies since his re-election victory.