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Turkey Doubles Transaction Tax on Consumer Loans to 10%

Turkey Doubles Transaction Tax on Consumer Loans to 10%

Sunday, 12 June, 2022 - 07:45
People shop at a open market in Istanbul, Turkey, June 10, 2022. (Reuters)

Turkey raised the tax on consumer loans amid a surge in inflation and as authorities boosted measures to bolster the lira.

The bank and insurance transaction tax rate on consumer loans was increased to 10% from 5%, according to a statement in the Official Gazette on Saturday.

The move follows a series of steps announced recently to support the lira, which has fallen 23% this year amid soaring prices and is the worst performing emerging market currency.

On Thursday, the banking regulator, also known as BDDK, cut debt repayment periods for consumers, while increasing the monthly minimum required payment on credit cards.

Turkey’s inflation surged to 73.5% in May, the highest level in 24 years.

The Turkish lira weakened to 17.24 to the dollar on Friday, compared to 17.2 on Thursday. The lira is heading toward the record low of 18.4 it hit on Dec. 20 during a currency crisis triggered by a series of unorthodox interest rates cuts.

The Turkish government declared it would keep the benchmark interest rate at 14 percent despite the soaring inflation. Inflation surged to 73.5 percent in May of last year.

“Turkey’s inflation is projected to stand at 48-49 percent by the end of this year,” Turkish Finance Minister Nureddin Nebati said.

Turkey's trade deficit jumped 157 percent year-on-year in May to $10.68 billion, the Trade Ministry said on Thursday, as soaring energy import costs continue to widen the shortfall.

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