Minister Mehmet Şimşek responds to 'new tax' question: 'Very clearly'

Minister of Treasury and Finance Şimşek made statements about the current agenda during a live broadcast on CNN Türk. Regarding the question, 'Will there be a new tax?', Minister Şimşek said, "It is not on our agenda."

Regarding inflation, Minister Şimşek stated, "The relief will be felt very clearly in the second half of 2025. The rate of increase in prices has already slowed down."

Key points from Minister Şimşek's statement:

WILL THERE BE A NEW TAX?

"We will review the discounted rates in terms of effectiveness and efficiency. Therefore, that issue aside, an increase in general VAT rates is not on our agenda. Two, an increase in corporate tax is not on our agenda. An increase regarding income tax brackets is not on our agenda.

"WE HAVE LEFT THE MOST DIFFICULT PROCESS BEHIND"

We accepted the first year as a transition year for inflation. We prioritized financial stability. Because we had vulnerabilities. We addressed them. You had to manage the vulnerabilities. Look, when you are making policy, when you are drawing a framework, you always start with the most critical ones and leave the others for later. Conditions are initially of a nature that will increase inflation. Later, the monetary policy we can use to lower it comes with a delay. We managed the KKM (FX-protected deposit) risk, we managed the exchange rate risk, and we brought the budget deficit under control.

If we hadn't done these, inflation could have been at a very different level. Now our three technical units are sitting down and saying, if the exchange rate, oil prices, etc., are like this and that, they have models and they are making estimates. We also took the average of this in our program. We did not have any intervention. If we hit the oil prices, we have some important assumptions. The real world is very complex and complicated. You make estimates with modeling and it involves very large estimates. We have left the most difficult process behind.

By managing financial risks, we have crossed an important threshold. We are aware of the difficulties, our citizens are right to complain. I go to the market and the grocery store; last week my wife, Esra, said, let's stop by the market. Our citizens came, their complaints are correct. They are right, we have a cost-of-living crisis. Inflation is the worst and most unfair tax. It distorts income distribution. We must do whatever it takes to bring inflation under control and lower it for permanent prosperity and purchasing power. Inflation falling to around 40 does not mean that prices have fallen. The decline in the speed of inflation means that while the average basket increased by 65 percent last year, it increased by 40 percent this year. Prices are rising, but they are rising more slowly. I want to underline this again. We are aware that low-income citizens are very affected, but there are no shortcuts.

"IT WILL BE REFLECTED BY 20 PERCENT"

Turkey's biggest problem right now is the cost of living and the deterioration of income distribution. We will bring inflation back to single digits for permanent prosperity growth. The AK Party achieved this before. In the 90s, the average inflation was over 70. It was not easy. But after 2003, we reduced inflation to single digits and kept it there. Until the treacherous coup attempt.

The relief will be felt very clearly in the second half of 2025. The rate of increase in prices has already slowed down. Generally, service inflation becomes ossified, rigid, and it takes more time to lower it. Look, because it comes from behind. For example, rent. Rent is within service inflation, meaning it is an important item.

A 25% practice, meaning an upper limit, had been introduced for rents. This has been lifted. Now, whatever you look at, you look at the previous year's inflation. So, when new rents are renewed, you have the last 12 months of inflation written, right? Therefore, service inflation is more rigid and falls more slowly. It will be reflected by 20 percent next year in June and July. Because of this, we need time. In other words, the slowdown in price increases is noticeable.

"WE DID NOT APPLY SHOCK THERAPY"

For example, we will increase housing supply. 201 thousand houses will be delivered in the earthquake zone this year. 250 thousand additional houses will be offered next year. There are also programs to increase housing supply in Istanbul. The decline in services will be felt even more clearly. We are about to cross a very large threshold in goods inflation. Service inflation will also fall. We need time, patience is required. We did not apply shock therapy. We saw that that option was not correct. Our purpose here is that we acknowledge the high cost of living and I am saying that we prioritized macro stability in the first year. Reserves have ceased to be a problem. We have reduced major risks. We need patience and time. Our President's support is also full."