A blow from the government to importers and exporters

The government has long claimed that its high exchange rate and low interest rate rhetoric was intended for exporters, using this as a justification for its policies. However, behind this rhetoric, a requirement was imposed on exporters to deposit a certain portion of their export proceeds into banks and convert them into the national currency. At the same time, while converting these proceeds at the bank, exporters suffered a loss of between 2 and 3 liras for every dollar due to the spread between the buying and selling rates. Now, as if that were not enough, the government has prohibited importers and exporters from deducting Value Added Tax (VAT) on customs duties, storage, freight, insurance, and similar payments added to the cost of goods during the import of products under surveillance and protection measures.

Importers bringing in goods under surveillance will no longer be able to deduct or offset Value Added Tax in any way and will continue to pay VAT. This decision covers 3,500 products under import surveillance. With Presidential Decree No. 7846, published in the Official Gazette dated 24.11.2023 and numbered 32329, the right to deduct Value Added Tax paid at customs within the scope of import surveillance and protection measures has been abolished. This decision entered into force on 24.11.2023. The President's Decree No. 7846 is a legally problematic decision.

The abolition of the right to deduct Value Added Tax calculated within the scope of import surveillance and protection measures should have been enacted by law. Importers who bring in goods under the scope of import surveillance and protection measures must file their declarations with a reservation when declaring the taxes they have paid to customs administrations. This reservation can be noted on the customs declarations or submitted via a separate letter. In this situation, if importers and exporters file a lawsuit against the customs administration, they may be able to deduct the taxes they were unable to deduct due to imports or receive a refund.

If this decision was made to restrict imports, it should be remembered that Turkey is a country that exports as it imports. This is a decision that increases the production costs of manufacturers who export as they import. Furthermore, this decision deals a major blow to exports and exporters, and will also reduce the domestic production competitiveness of certain products.