VAT conundrum for simit: 1 percent for bakery purchases, 10 percent for cafe purchases

While the price hike on simit was withdrawn during the March 31 local elections, a VAT increase has come to the agenda following the elections.

According to the report by Erdoğan Süzer from Sözcü, since businesses that currently charge 1 percent VAT on simit and collect it from citizens will now charge 10 percent VAT, the prices of these products will increase by the same rate, meaning by 9-10 percent.

THE 1 PERCENT RATE IS BECOMING A THING OF THE PAST FOR BUSINESSES WITH TABLES AND CHAIRS

According to the VAT Law, the authority to increase or decrease VAT rates lies with the President. In practice, products such as simit, savory pastries (börek), poğaça, cakes, and cookies produced by establishments like restaurants, patisseries, and cafes are subject to 1 percent VAT if they are taken to go or ordered as home delivery. If the same product is consumed while sitting in the patisserie or cafe, 10 percent VAT is charged. According to the draft communiqué, 10 percent VAT will now be applied to products purchased on the go or delivered to homes from patisseries, cafes, and even street kiosks that have tables and chairs and provide sit-down service. The 1 percent VAT rate will completely disappear for businesses with tables and chairs.

TAX OFFICIALS SAY TAX EVASION IS OCCURRING

It has been stated that businesses such as patisseries and cafes, which both sell food products to go like a market and provide sit-down service to their customers, have been using the VAT confusion as an opportunity to avoid taxes. It is noted that some businesses issue receipts with 1 percent VAT for everything without distinction when selling simit, which has 1 percent VAT, and soda, which has 10 percent VAT, and that some businesses show products like cakes, simit, and tea served at tables as if they were sold on the go to charge 1 percent VAT. Tax officials state that significant tax evasion is occurring through this method.