SCT regulation on fuel and tobacco products
In line with presidential decrees, significant changes have been made to the rates and principles of the Special Consumption Tax (SCT) applied to fuel and tobacco products. The gradual phasing out of the sliding-scale price system and revised cigarette taxes are notable.
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In our country, the domestic producer price index (D-PPI) announced by the Turkish Statistical Institute (TÜİK) every January and July is used as a reference for determining the amount of SCT on petroleum products, alcohol, and tobacco products. However, with the newly published Presidential Decrees, fundamental changes are being implemented in these practices.
According to information obtained from the Ministry of Treasury and Finance, the new measures are justified by the aim of adapting to recent economic developments and reducing the burden on the budget.
GRADUAL END TO THE SLIDING-SCALE SYSTEM
According to the latest regulations, the practice known in the public as the "sliding-scale system" (eşel mobil), which covers gasoline, diesel, LPG autogas, and similar products, will be phased out gradually. Until July 31, only 50 percent of the increase in domestic refinery prices for fuel will be covered by an SCT reduction, and between August 1 and September 30, 25 percent will be covered. In the event of price decreases, an SCT increase equal to the full amount of the reduction will be applied. The system will end completely on October 1.
Additionally, the D-PPI update will not be applied for the July-December period of this year for products in list (I) attached to the SCT Law. Thus, automatic tax updates linked to price fluctuations will be temporarily suspended.
According to the Ministry's assessment, the sliding-scale system has made a significant contribution to the disinflation process over the last four months. However, it is emphasized that with the decrease in the impact of the US/Israel-Iran conflict and the decline in international oil prices, ending the system will not pose a risk in terms of inflation under current conditions. Furthermore, it is aimed at reducing the pressure on budget expenditures.
BALANCED FORMULA FOR SCT ON CIGARETTES
With the regulations introduced for tobacco products, changes have also been made to the tax structure of cigarettes. While the minimum specific tax amount for cigarettes has been increased to 2.2953 TL and the specific tax to 23.7404 TL, the tax rate has been set at 42 percent. As in the current legislation, the update based on the D-PPI will not be applied to cigarette products during the July-December period of this year.
Furthermore, the relative SCT rate on cigarettes has been reduced from 45 percent to 42 percent. Thanks to this step, it is anticipated that price increases that may be made by manufacturers will occur at more reasonable levels. The increase in the specific tax amount aims to balance the revenue loss that the reduction in the relative tax would create. According to calculations, the final price increase required for a 1 TL increase in cigarette prices has been reduced from 3.19 TL to 2.91 TL.
For other types of tobacco products and alcoholic beverages, the SCT update at the D-PPI rate will continue to be applied throughout the July-December period.