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Changes made to withholding tax rates: Hakan Kara comments

The income tax withholding rate applied to deposit accounts, which had been temporarily reduced to 5 percent from 15 percent, expired yesterday. Former CBRT Chief Economist Hakan Kara criticized the lack of withholding tax on FX-protected deposits (KKM) via his X account.

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The income tax withholding advantage applied to Turkish Lira deposits has begun to decrease. The tax rate for short-term deposits has increased by 2.5 percentage points to 7.5 percent. Those who invest their money in deposits will now have to pay 2.5 percentage points more in taxes on the interest income they earn.

Meanwhile, the income tax withholding rate for FX-protected deposits (KKM), which is planned to be phased out gradually, remains at 0 percent.

Former CBRT Chief Economist Hakan Kara commented on the exclusion of KKM from the tax increase. Kara stated, "The mass conversion of KKM accounts into foreign currency is still seen as a risk."

Kara's post is as follows:

"Withholding tax has been increased on TL deposits and investment funds. There is no withholding tax on KKM.

Comment: The recent increase in foreign exchange reserves seems to have encouraged economic management to collect taxes on interest income. On the other hand, the mass conversion of KKM accounts into foreign currency is still seen as a risk.

KKM is like a shackle on the feet of economic management. Every instrument has to be designed accordingly. In my opinion, the CBRT raising interest rates at the last meeting, then accelerating the exit from KKM and gradually liberalizing the exchange rate would have eased the system.

A little more courage."