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2013 comes bearing tax hikes for Turkish consumers.

Along with New Year's celebrations and best wishes there was one more thing that accompanied consumers in Turkey entering 2013: new tax hikes. The government has introduced a series of new regulations in the taxation system, mostly increasing taxes on certain products while introducing some tax cuts on bank deposits and foreign loans.

Tax hikes are aimed at increasing state revenues following a significant deterioration in the country's budget balances. The government decision to introduce hikes on separate taxes ranging from value added tax (KDV) on tobacco and real estate to motor vehicle taxes (MTV), GSM subscriptions along with fees paid to receive such official documents as passports and driver's licenses was published in the Official Gazette on Tuesday.

The authorities have been working on the new hikes since Finance Ministry data found the January-September budget deficit in Turkey to be TL 14.4 billion ($7.9 billion). This data was proof the government had missed its budget targets considering the state coffers enjoyed a $129 million surplus.

With the new hikes, the share of taxes per cigarette pack increased from 80 percent to 81.6 percent. This means the state will collect TL 6.53 in tax from a package of cigarettes that is sold for TL 8. Following this hike, tobacco companies separately increased the prices of their own products in the markets. Philsa Philip Morris, a consortium of US cigarette producing giant Philip Morris and Turkish giant conglomerate Sabanci Holding, announced on Wednesday that the company increased cigarette prices by TL 1 each.

The new wave of hikes saw the KDV on real estate purchase rise. The government introduced a new taxation system on real estate, defining the KDV in line with the size and also the price of the real estate. Prior to this new regulation, the state used to collect KDV on real estate based on the size of the property. The new regulation defines the tax combining the size and also the estimated value of the real estate.

The state will collect 8 percent tax on real estate smaller than 150 square meters with the value per square meter ranging between TL 500 and TL 1,000. If the value is above TL 1,000 then the buyer will have to pay 18 percent KDV to the state. This regulation aims to encourage construction firms to first sell their inventories before starting new projects. Accordingly, a customer buying a house -- covered by the tax hike -- worth TL 200,000 will have to pay TL 38,000 in KDV.

Representatives from the real estate sector said house prices could increase by as much as 20 percent in the new projects. Real Estate Investing Partners Association (GYODER) President Isik Gokkaya said in Istanbul on Wednesday that the tax hikes would mean an extra burden on customers "who already have difficulty in repaying their debts" if they plan to buy a new apartment.

According to Istanbul Contractors' Association (INDER) President Nazmi Durbakayim, only a few projects in Istanbul will remain unaffected by the tax hike, considering the majority of new houses cost over TL 1,000 per square meter to construct.

When it comes to motor vehicles, the new regulation increases the motor vehicle tax (MTV) on vehicles with an engine displacement less than 1,300 cc -- mostly found on hybrid vehicles and ultra light sedans -- to TL 518 up from TL 480 in 2012.

The government has introduced a new tax regime to levy relatively lower tax on long-term bank deposits. The state used to collect 15 percent withholding tax on all Turkish lira deposits irrespective of the term it remains in a bank's coffers. The new regulation decreases this tax rate to 12 percent on money remaining deposited from six months to one year.

If the money remains deposited for more than 12 months, the state reduces the withholding tax to 10 percent. The regulation enables customers to withdraw their money with no loss of interest earned or share of profits given by the bank.

The regulations for 2013 also cover providing support for the private sector in securing bank loans. The government reduced the Resource Usage Support Fund (KKDF) for companies that receive loans from foreign financial institutions for long-term loans

Meanwhile, the state will charge a total of TL 198.7 for passports issued for one year and longer. Citizens willing to get a B class driver's license will pay over TL 300 to the state. Subscription fees for GSM usage also increased to TL 39 from previously TL 37.
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Publication:Today's Zaman (Istanbul, Turkey)
Date:Jan 2, 2013
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