Turkey Plans Higher Taxes on Top Earners as Fiscal Strains Mount
Turkey Plans to Raise Income Tax for High Earners
(Bloomberg) --
Turkey plans to raise income tax rates on top-bracket earners, the latest effort by the government to temper fiscal pressures.
Individuals who make 1 million liras ($171,000) or more will be subject to a 45% income tax rate, while those earning 500,000-to-1 million liras will pay 40%, according to a person familiar with a draft bill submitted to parliament, who asked not to be identified because it hasn’t been made public yet.
The tax rate for both income brackets is currently 35%. The Treasury and Finance Ministry’s press office didn’t comment on the plans when reached by phone.
The government is not planning on raising the tax rate on lowest-income earners, the person said. The draft bill also introduces a capital gains tax, another person with knowledge of the matter said.
The initiative comes ahead of a heavy debt repayment schedule next year that threatens to strain government finances. In the first quarter alone, the Treasury plans to redeem about 75 billion liras of local-currency debt, a record figure for the period in data going back to 2005.
The fiscal stress comes amid an economic downturn last year that hit tax revenue, and a spending spree amid back-to-back elections. Earlier this year, the government received a 40 billion lira payment from the central bank, a one-off cash injection to help finance its needs.
Turkey’s budget gap stood at 68.1 billion liras through August this year, a 34% increase compared to the same period in 2018. When central bank cash transfers are excluded, the government posted a deficit in seven out of the eight months.
To contact the reporters on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net;Firat Kozok in Ankara at fkozok@bloomberg.net
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, ;David Merritt at dmerritt1@bloomberg.net, Constantine Courcoulas, Marton Eder
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