World Bulletin / News Desk
A recent wave of tax hikes on consumables like gas and alcohol are “not long-term solutions” to Turkey's debt woes, Deputy Prime Minister Ali Babacan said at an International Monetary Fund (IMF) summit this weekend in Tokyo, where he told reporters that the government must take more steps to reign in the staggering portion of Turkey's economy that escapes tax collectors.
“When Turkey's informal economy is reduced, government revenue is going to go up -- that's when it will be possible to reverse course and reduce taxes on consumables,” Babacan told reporters during a press conference.
The minister's promise that the new wave of tax hikes are only temporary comes amid wide public opposition to those hikes, which upped prices on automobiles and alcohol and made Turkish gasoline officially the world's most expensive. Taxes currently make up roughly 70 percent of the cost of Turkish fuel, which costs a staggering TL 4.83 a liter ($10.16 a gallon). That price is a hard burden to bear for Turks, whose average daily income was estimated at just $21.33 in 2011.
The easily enforced tax on sales of consumables like gasoline increasingly stands in for revenue that would have been collected from the near 40 percent of the economy that escapes taxation, Babacan said over the weekend, suggesting in turn that the real way to boost government revenues and balance the government's deficit is to reduce the size of the informal economy.
“In the long run [the consumables tax] isn't a sound policy, we have to agree to that,” he said, adding, “But we need to take measures to preserve fiscal discipline and, in the short run, balance the budget.” Babacan said earlier this month that the budget deficit would expand from TL 33.47 billion this year to roughly TL 34.31 billion by 2015 and warned that the deficit remains one of the largest challenges to the country's economic stability.
The effort to reign in the country's informal economy -- among which the textile and regulation-skirting construction industries have long been the biggest participants -- has already begun, with government officials praising in July a Turkish Statistics Institute (TurkStat) report that concluded that the informal economy had been reduced to 37.5 percent of the country's gross domestic product (GDP). Though still staggeringly high, that number was a considerable improvement over the 50 percent of GDP which for decades escaped any taxes or regulations, and reflects what Babacan and others have said is a five-year campaign to audit company registers and to award stiff fines to firms guilty of tax evasion or failure to register employees for the country's compulsory social security program.
Government taxes on consumables meanwhile continue to bite consumers, with economists warning in September that the spike in fuel costs -- which coincided with a 9.8 percent rise in the cost of natural gas and electricity -- are likely to fuel inflation on basic goods, especially food.
Biden and his wife also visited the principal Greek Orthodox cathedral and the historic Suleymaniye Mosque in Istanbul
Davutoglu says pro-Kurdish HDP party should express its sincerity to solution process with apology.
U.S. Vice President Joe Biden said he and Turkish President Tayyip Erdogan he had discussed a transition of power in Syria away from President Bashar al-Assad during a four-hour meeting in Istanbul
A 25-year-old Serbian basketball fan was killed in Istanbul on Friday night before a Turkish Airlines Euroleague game.
Yildiz says $2 billion in oil exported so far; expresses concern for Russian gas import decline in Turkey.
Trouble flared up outside the Abdi Ikpeci Arena in Istanbul before the match when around 400 Red Star fans arrived but were banned from entering, according to RTS
Prime Minister Ahmet Davutoglu also highlighted the importance of U.S. and Turkey relationship, especially in the current backdrop of regional turmoil
US Vice President Joe Biden has said Turkey is the only country which is expected to grow in the next decade in Europe
Gul dismisses as 'fallacious and unreal' remarks attributed to him by Iran's state-owned Press TV
Luxembourg Foreign Minister Jean Asselborn says he supports Turkey's bid for EU accession
Turkish officials attempted to prevent the execution but failed.
Input from developing countries and small to medium-sized enterprises are themes for Turkey's G20 presidency next year
The ratings agency also issued a "negative" outlook for Turkey, predicting GDP growth will slowly return to above 3 percent.
Biden meets with Turkish Prime Minister Davutoglu during his Istanbul visit.
The summit is expected to evaluate and endorse the "Joint Implementation Plan of Africa-Turkey Partnership 2015-2018," featuring key areas of cooperation.
Ministerial candidates nominated by interim premier Ahmed Tuma will be voted on in the meeting