How Ankara is using taxes to target boozers
Author: Mustafa Sonmez Posted January 11, 2017
Turkey’s consumer inflation rate hit 8.5% in 2016, surpassing the government’s 5% target. A number of factors contributed to this outcome, including the dollar’s 20% rise against the Turkish lira. Such high inflation also has to do with alcoholic beverages and tobacco, which figure in the “pleasure-giving substances” category. The price increase in this category last year was nearly 32%, or 276% higher than overall consumer inflation. The category accounts for less than 5% of the total consumer basket, and although the exorbitant price increases likely only concern a limited number of people, in Turkey’s prevailing political climate, they speak of growing discrimination and intolerance against Turks who reject the conservative lifestyle the government promotes.
Statistics show that last year’s price increase for raki, the aniseed-flavored national booze, exceeded 25%. The increase for beer, the alcoholic beverage consumed most in terms of quantity, was 26%, and the increase for wine was 13%. Soaring prices for alcohol, however, have not been limited to 2016. Since the Justice and Development Party (AKP) came to power in November 2002, Turkey has seen stark price hikes in tobacco and alcoholic beverages. According to figures by the Turkish Statistical Institute, overall consumer prices increased 181% from 2003 to 2016, while the price of raki rose 500%. Yes, that's right — 500%. Beer and wine prices soared 423% and 235%, respectively, during the same period.
The minimum wage in Turkey today is 1,400 lira (about $370), meaning that minimum wage earners who want to buy a liter of raki a month need to allocate 8.5% of their salaries for its purchase. While 1 kilogram (2.2 pounds) of beef costs 40 lira and 1 kilogram of kashar cheese 25 lira, the price of 1 liter of raki stands at 117 lira. In short, raki, once an ordinary pleasure commodity, has become — or rather, has deliberately been made — a luxury product that most Turks in the low- and middle-income groups cannot afford.
The 500% increase in the price of raki over the past 14 years is exclusively an AKP accomplishment, as the price hikes stem from the special consumption tax (OTV) levied on alcohol and other products. Fifty-five percent of the price goes to the government budget as OTV. In 2016, the government generated about 8 billion lira in OTV from alcohol sales. OTV revenues from tobacco sales, meanwhile, were 30 billion lira, double the OTV generated from car sales.
The OTV from alcoholic beverages amounts to 1.7% of total tax revenues. This may not be a very high figure, but the tax hikes are not aimed at revenue boosting. The real objective is to deter the consumption of alcohol, especially raki, in line with religious rules. With its Islamist tendency no longer under wraps, the AKP appears intent on stamping out alcohol consumption.
President Recep Tayyip Erdogan set the tone in the 1990s, when as mayor of Istanbul he removed alcohol service from municipal facilities. In provincial Turkey, conservative social pressures — or “neighborhood pressure” as Turks call it — have grown strong and widespread. Mayors and governors have attacked alcohol sales and services, sometimes through moral pressure and sometimes by pushing the limits of their authority. Alcohol beverages have disappeared from receptions and celebrations, and the raki festival in Adana and the beer festival in Antalya have been abolished.
Erdogan has used a constitutional provision calling for the protection of youth against harmful addictions as justification for his moves. In 2005, for instance, the then-prime minister said, “Look at Article 58 in the constitution. You are not supposed to darken the future of the youth. We are fulfilling the duty that has been assigned to the state to protect the youth against alcohol addiction, drugs and harmful habits. No one should skew the issue.”
During its first term in power, the AKP had kept its hostility toward alcohol largely under wraps, but after boosting its popular support in subsequent elections, it began to openly implement measures consistent with its outlook. An AKP-authored law imposing a series of new alcohol restrictions took effect in June 2013. It banned shops from selling alcohol from 10 p.m. to 6 a.m. and prohibited all forms of advertising and promotion of alcohol, requiring even the removal of shop signs. Alcohol producers were barred from sponsoring events, and television broadcasters were required to blur images of alcohol in movies, soap operas and music videos.
Turks, in fact, are quite modest boozers, lagging far behind Westerners. In a 2010 survey commissioned by the Health Ministry, Ankara’s Hacettepe University found that only 23% of Turkish men and 4% of Turkish women drank alcohol. Western Marmara topped the list in terms of regions, with 20% of its population drinking, followed by the Aegean with 18.8% and Istanbul with 17.6%. Beer dominated the alcohol market, constituting 90% of sales. In terms of pure alcohol — the amount of alcohol in alcoholic drinks — annual consumption in Turkey stood at 1.55 liters per capita, while in European countries it reached 10 liters.
How has alcohol consumption changed as a result of the bans, tax hikes and neighborhood pressure? The results appear to be mixed. Statistics by the Tobacco and Alcohol Market Regulatory Authority show that the hefty tax hikes have driven a decline, especially in raki sales. In 2015, raki sales amounted to 39 million liters, down 11% from about 44 million liters in 2004. In contrast, beer sales increased 12%, to 908 million liters in the same period. Wine and vodka sales, meanwhile, shot up by 136%, to 77 million liters.
In short, the OTV — representing more than half the price of raki and 63% the price of beer — has put raki beyond the reach of many and made beer a truly expensive pleasure. Obviously, this has little to do with protecting the health of citizens and is rather an intervention in lifestyles. The AKP may insist to the contrary, but the hefty taxes, sales restrictions and neighborhood pressure are all signs of intolerance toward drinkers, no matter how small a minority they are.
Read More: http://www.al-monitor.com/pulse/originals/2017/01/turkey-national-drink-struggle-hefty-taxes.html