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Turkey raises taxes up to 20% on basic goods as deficit, inflation linger

The move follows changes to Turkey’s monetary policy and a new cabinet following President Recep Tayyip Erdogan’s reelection.
ISTANBUL, TURKEY - MAY 03: People shop at a local street market on May 03, 2023 in Istanbul, Turkey. Persistently high inflation has led to a cost-of-living crisis in Turkey that has hurt President Erdogan's popularity ahead of the March 14 presidential election. (Photo by Burak Kara/Getty Images)

The Turkish government raised taxes on different sectors and industries on Friday amid Turkey’s worsening budget deficit and President Recep Tayyip Erdogan’s efforts to save the economy following his reelection victory.

The value-added tax (VAT) on some goods such as cleaning products was raised from 8% to 10%. The tax on others such as home appliances was raised from 18% to 20%. Fees for various administrative services were raised by 50%. Turks who buy smartphones abroad will now have to pay approximately 20,000 Turkish liras ($766) for the registration of their phones, a more than 200% increase, according to Turkey's Official Gazette. 

Some of the taxes came into effect immediately, while others will take effect in the coming days. The hikes prompted large lines at Turkey's border with Georgia, with people scrambling to buy phones and register them before that fee comes into effect on Monday, according to Turkish media reports. 

Background: The tax increases come amid Turkey’s widening budget deficit. It ballooned to 263.6 billion Turkish lira ($10.21 billion) during the first five months of 2023, up from 124.6 billion ($4.78 billion) the previous year. The increase was due to spending ahead of Turkey’s elections in May as well as the impact of the deadly February earthquake in the country's southeast, according to Reuters

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