Turkey lowers taxes on staple foods to tackle high inflation
Turkey’s president has announced a significant cut in taxes on basic food supplies as the country faces soaring inflation and widespread protests over eroding living standards
President Recep Tayyip Erdogan said value added tax would be lowered to 1% from 8% on food purchases. Its decision will be published in the Official Journal and will come into force on Monday.
Erdogan said that in addition to the tax cut, the government “expects” food companies to lower their prices by 7%. He said that these foods play an important role in inflation.
Official January data showed inflation hit a staggering 48.69% a year, although independent experts say the real figure is much higher, over 115%.
“We will not let inflation crush our nation,” Erdogan said.
Critics, however, say the country is suffering from high inflation due to Erdogan’s insistence on lowering interest rates. He believes that inflation is caused by high interest rates, contrary to established economic theory.
The central bank, whose independence has been eroded by the government, had lowered the key rate by 500 points since September to 14%, but suspended rate cuts in January.
A currency crisis was triggered by the cuts and the Turkish lira hit record highs in December. Because Turkey depends on imports for its energy needs as well as raw materials and many food supplies, prices have skyrocketed.
The government insists that Turkey’s economic downturn has been caused by foreign interference and external factors. Erdogan said on Saturday that Turkey would fight “threats to destroy our economy” with all available means.
The lira closed this week at 13.49 against the dollar. The December record low was 18.36. The currency has been hovering around 13.5 since its record low after the government introduced a new financial tool to steer savers away from buying foreign currency and encourage them to convert their dollars into Turkish liras with a deposit system. protected against currency fluctuations.
Households and businesses have suffered from sharp increases in energy prices. Authorities raised electricity tariffs on Jan. 1, pushing prices up more than 50% for many homes and up to 127% for businesses and high-consumption households. Some protests have broken out and many small businesses like restaurants have shared their electricity bills on social media to show how close they are to being driven out.
Turkish Treasury and Finance Minister Nureddin Nebati said on Saturday that electricity and natural gas prices, which have risen globally, remained lower than actual prices in Turkey thanks to government subsidies. He asked critics to “be more fair”.
Strikes are also taking place in Turkey as inflation erodes the value of workers’ paychecks. Freight, food delivery, factory and warehouse workers have halted work at many businesses, and social media campaigns to boycott companies that don’t raise wages continue.
Thousands of healthcare workers went on a one-day strike on Tuesday, demanding better working conditions and pay, as well as measures to protect them from rising verbal and physical attacks from patients or their relatives.
Also on Saturday, Nebati announced a measure to encourage people to bring back the gold they have saved. He said 1,500 gold deposit points would start operating on March 1 to bring the precious metal into the financial system as deposits.