May 15 2019

Turkey re-introduces tax on foreign currency sales

Turkey re-imposed a tax on foreign currency sales after a decade-long suspension in another apparent effort to bolster the embattled lira.

The 0.1 percent tax will be introduced for sellers of foreign currency, according to a presidential decree published in the Official Gazette on Wednesday. Exceptions will be made for banks selling to the Treasury, trading between themselves, and for the repayment of foreign currency loans.

Turkey has applied a series of measures to stem losses for the lira after a currency crisis that wiped off 28 percent of its value against the dollar last year. Most controversially, local banks stopped trading in the offshore interbank market in March, pushing interest rates there to as high as 1,300 percent.

Trading in the lira spot market totalled almost $4 billion in April, according to official data.

Troubles for the lira have continued this year. The currency dropped 0.5 percent to 6.06 per dollar at 1:49 p.m. in Istanbul, taking losses since January to about 13 percent.

Traders and analysts say the move is an effort to discourage buying of foreign exchange.

Tufan Cömert, coordinator in the research department of Garanti Securities, said there was some confusion about which trades the new tax would apply to.

“Right now there is deep confusion in the sector,” Cömert said in comments on Twitter. “There needs to be clarity right away on issues such as whether it (the tax) is only on lira trades, from fx to fx, does it include forwards.”