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Turkey Plans to Raise Tax on Lira Deposits to Cut Budget Deficit - BLOOMBERG
(Bloomberg) -- Turkey is planning to increase the tax on lira deposits and money market funds in coming days, as it seeks to narrow a budget deficit estimated at around 5% of GDP for last year.
The extent of the raise is still under consideration, people with direct knowledge of the matter said, declining to be identified as discussions are private. It wasn’t clear if an increase in the withholding tax rate would apply to all deposits, currently ranging 5% to 10%.
The Treasury and Finance Ministry was not immediately available for comment. The rate is scheduled for review on Jan. 31 and plans may yet change.
A move to raise taxes on lira deposits risks making savings in local currency less attractive and drive people to seek alternatives, such as the dollar and local stocks. It comes as the Turkish central bank balances the start of a cautious rate-cut cycle with an inflation rate that remains nearly nine times above the 5% target.
Annual inflation is forecast to slow to around 41% this month from 44.4% in December. The central bank has delivered two straight rate cuts, lowering the policy to 45% in January. It aims to slow prices to 21% at the end of the year while continuing with the reductions in the seven remaining Monetary Policy Committee meeting this year.
Taxes on deposits were last raised in November. Officials also imposed a 10% tax on money market funds in the same period.
