Tax statement from Mehmet Şimşek: Will there be price hikes after the election?

Minister of Treasury and Finance Mehmet Şimşek made statements during a joint broadcast on Habertürk TV and Bloomberg HT.

Şimşek responded to claims that there would be hikes in VAT and corporate tax after the election as follows:

"WE HAVE NOT EVEN CONSIDERED IT"

"There will be no general increase in VAT, corporate, or income tax rates. We have not even crossed the idea of a new regulation regarding the motor vehicle tax from our minds."

"WE WILL IMPLEMENT WHATEVER THE VISION IN THE MTP IS"

Şimşek continued his remarks regarding the claims:

"We will not surprise the citizens, the markets, or the business world. We will implement whatever the vision in the MTP (Medium Term Program) is. It says we will review tax exemptions there. There will be no increase in the general rates of VAT, income tax, or corporate tax. There will be no regulation in the MTV (Motor Vehicle Tax)."

Highlights from Minister Şimşek's statements are as follows:

"WE NEED RESOURCES"

Many claims are being put forward regarding the election to increase distrust in the markets. You can ask our press advisors about the claims. Their intentions are bad. Other than informality and reviewing some exemptions, we do not have any special work.

We have started rationalization in expenditures. Citizens also want us to save. The citizens are right. Regarding vehicles, we say you can only buy domestically produced and electric ones. If a new vehicle is wanted, we say you will sell the vehicle you have. We are sensitive about these issues. There is a savings circular issued by the President.

We will support disinflation on the fiscal side. Starting from next year, we will permanently pull the ratio of the budget deficit to national income below 3 percent.

We are transitioning to an activist industrial policy. We need resources. We will transfer these resources to transformation in industry, digital transformation, and green transformation.

EXCHANGE RATE STATEMENT

We do not have an exchange rate target, and there will not be one. The Central Bank is present in the market regarding the KKM (FX-Protected Deposit Scheme). They say we have no other intervention besides this.

Expectations regarding the depreciation of the lira after the election do not seem meaningful. The current account deficit is decreasing. Our need for foreign currency is also decreasing. When the current account deficit drops to around 30 billion dollars, it means a rate of 2.5-3 percent. If we finance one point of this with direct investments, we will have reserve accumulation.

"THERE WILL BE SIGNIFICANT RESOURCE INFLOW"

Last year, there was a net portfolio outflow in the first 5 months of the year. This year, there is a net inflow. The disinflation process in the world will increase interest in emerging markets. There will be significant resource inflow to Turkey after the election. International organizations will provide us with significant resources. We expect 12.7 billion dollars in project loans this year. Last year, 8.8 billion dollars in project loans arrived.

The annual policy rate corresponds to 56 percent. The deposit interest rate is at the 50s level. There is a policy set that supports the TL.

In an environment where election uncertainty is removed, why should the TL depreciate more than inflation? I respect the portfolio preferences of the citizens. I do not want to give guidance on this matter. When our program is successfully implemented, there will not be a real depreciation in the TL. In successful disinflation programs, the local currency has gained value in real terms.

"ANNUAL INFLATION WILL REMAIN HIGH"

The trend in inflation is consistent with the program. Inflation came out a bit high in January. There may be a continuation of that in February. From March onwards, inflation will settle into a trend. But annual inflation will remain high. We have communicated this. Because there is a base effect. Secondly, monetary policy works with a delay. There is a transmission mechanism spread over 12, or even 18 months.

When we arrived, we floated the exchange rate. There was a temporary inflationary effect. That also has an effect. Income policy has an effect. There was an earthquake last year. There was a significant increase in construction materials last summer. There will be no such increase this year.

Monetary policy will work. It will not see a real depreciation in the exchange rate. The earthquake effect will fade.

Monetary policy is under the authority of the Central Bank.

On the fiscal policy side, we will not take any steps that will increase inflation."