Turkey considers doubling tax on foreign exchange sales

The Turkish government is planning to double a tax on foreign exchange sales that was reintroduced in May to bolster the embattled lira, news-site Habertürk reported on Friday. 

The ruling Justice and Development Party (AKP) submitted to parliament a new bill that proposes increasing the tax on foreign exchange transactions from 0.1 percent to 0.2 percent, Habertürk said. 

The bill also gives the Turkish presidency the right to increase the withholding tax over interest revenue of foreign currency deposits, currently at 15 percent.

“We have envisaged in the draft bill giving the president the power to increase (the withholding tax) up to two-fold,” Mehmet Muş, the deputy head of the AKP’s parliamentary party told Habertürk. 

Turkey has applied a series of measures after a currency crisis last year wiped off 28 percent of lira’s value against the dollar.

The planned tax increase on foreign exchange sales aims at curbing “dollarisation”, the tendency of Turkish nationals to hold their savings in foreign currencies and to sell lira in order to protect themselves against the erosive effects of inflation.

The amount of foreign currency held by Turkish residents in deposit accounts grew by $1.4 billion in the week to Oct. 18. 

Turkey’s annual consumer price inflation fell to 9.3 percent in September, its lowest level in two years, from 15 percent the previous month. But economists predict that the slow down in inflation is not permanent and Turkey will have to cope with double-digit inflation again by November. 


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