Türkiye has no plans to impose a tax on gains made on the stock market but is rather evaluating a small transaction levy as it seeks to encourage investors to hold positions for longer, a top official said late Monday.
Reports last week suggested Turkish authorities were planning to tax proceeds from stocks and cryptocurrency. Both Vice President Cevdet Yılmaz and Treasury and Finance Minister Mehmet Şimşek denied that.
"There are discussions about charging a small amount for transactions on the stock exchange. There is no tax on gains on the stock exchange; it is not on our agenda," Yılmaz told an interview with private broadcaster NTV.
Yılmaz said authorities were studying a 0.01%-0.02% tax on stock trading.
Şimşek told Bloomberg last week that the government was mulling "a very limited" transaction tax.
Regarding cryptocurrencies, Yılmaz said there is also a discussion about imposing slightly higher, but still minor, fees.
"The purpose here is not to generate revenue," he said.
"Very frequent entries and exits" don’t allow for stability in the market, Yılmaz noted, adding that the potential levy aims to make investors see stocks as a longer-term investment.
He emphasized that the tax regulations are not inflationary but rather aim to reduce informality.
Drop in consumer prices
On inflation, Yılmaz said they are taking steps to strengthen the groundwork for combating growth in price gains and noted that the downward trend began after May.
Inflation reached an annual 75% in May, which is said to mark the peak before tight policy and a relatively stable Turkish lira bring relief.
Since June last year, the country's central bank has gradually lifted its benchmark policy rate to 50% from 8.5% and has pledged to tighten it more if there is "a significant and persistent deterioration" in the inflation outlook.
Authorities also introduced measures to cap strong domestic demand, one of the main reasons for higher imports and to boost investments and exports to improve the current account balance.
Yılmaz said households would start feeling the drop in consumer prices this summer.
He predicted that the decline would continue through July, August and September and expected inflation to decrease to 38% by the end of the year. He also reiterated the goal of reducing inflation to single digits by 2026.
Yılmaz also said Türkiye would maintain its healthy economic growth alongside the fall in inflation, adding that growth was on track to meet the government's medium-term program target of 4% by year-end.
"We are continuing on our path with a growth composition that is not consumption-oriented but more focused on production, export and investment. While fighting inflation, we are also striving to maintain growth and employment," said the official.
"In the short term, you may see contradictions between inflation and growth, but let us not forget that one of the fundamental conditions for healthy, sustainable growth is price stability. Achieving price stability increases predictability and fosters confidence."
Phasing out FX-protected deposit scheme
Among others, he also assessed the impact of last year's devastating earthquakes that struck the country's southeastern region on the budget.
Türkiye closed 2023 with a budget deficit of 5.2%. Excluding quake expenditures, that rate stood at 1.6%, Yılmaz said.
He stated that they forecast a gap of 6.4% for this year.
Regarding the foreign exchange-protected deposit (KKM) scheme, which weighed heavily on the budget, Yılmaz said the program was intended as a temporary measure and that it had fulfilled its role.
"We are now gradually phasing it out," he noted.
The scheme was launched in late 2021 to help reverse dollarization and support the lira. It sought to encourage people to keep their savings in lira through guarantees to compensate for losses from a decline against hard currencies.
The deposits under the scheme have fallen by around $60 billion to $66.7 billion as of late May, from as high as $126 billion last August.
Yılmaz said the speculative atmosphere that arose before the local elections this March has dissipated and that Türkiye is going through a period featuring lower foreign exchange needs and easier access to hard currency at lower costs.
He said the central bank's gross reserves, which stood at $98.5 billion in May of last year, have increased to $143.6 billion. Net reserves, excluding swaps, have also turned positive, he added.