ANKARA: The Turkish government is working on an alternative value-added tax (VAT) scheme to relieve the financial burden on companies as the current law deters investment, Finance Minister Naci Agbal said.
The overhaul, which the government aims to announce by 2018, would not see an across-the-board reduction in the 18 percent VAT rate, Agbal said. Rather, the government plans to lower the rate to 8 percent or 1 percent for some strategic sectors. “Current VAT law is a financial burden for companies and creates a deterrent effect for investment,” he said in the interview in Ankara late on Tuesday. “We are working on alternatives to relieve the burden on taxpayers.” While Agbal did not say which sectors would likely see the biggest tax cuts, he said the changes would be carried out in a way to avoid a spike in inflation. Turkey’s central bank is battling double-digit increases in consumer prices that have been stoked by volatile food costs. Turkey collected more than 10.6 billion lira ($3 billion)from restructuring of tax and social security payments year-to-date, Agbal said, adding that efforts to lower the budget deficit continued.