Turkey Eyes Taxing Stock Gains to Shore Up Budget
(Bloomberg) -- Turkey is considering taxing proceeds from investments in stocks and cryptoassets as part of a fiscal tightening push. Stocks and the lira fell on the news.
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Treasury and Finance Minister Mehmet Simsek discussed the plans during a ruling-party meeting over the weekend, AK Party officials told Bloomberg, asking not to be identified as the discussions were private. Simsek emphasized the need for proper taxation of all financial income during the meeting, the people said.
Turkey cut the tax rate on profits from stock-market trading to 0% from 10% in 2008. Ministry officials, who requested anonymity, confirmed ongoing work on the issue but said that no final decisions have been made and declined to comment on the potential scale of the levy. The Treasury and Finance Ministry’s press office declined to comment.
The Borsa Istanbul 100 index — one of the word’s best performing stock indexes this year — dropped to a nearly three-week low after the news, closing down 1.8% on Tuesday. The country’s banking index lost 4.1%, most since April 16, while the lira weakened as much as 1.2% against the dollar.
“In the short term, this sounds like pain for the equity market, but in the long term, it means a huge gain,” said Burak Cetinceker, a money manager at Strateji Portfoy in Istanbul. Over the longer-term, such a move may “reduce volatility, enhance the investment culture and reduce speculation,” he said.
The plans come as Turks have shown growing interest in the stock market, with the number of equity accounts soaring nearly seven-fold since early 2020 to 8.3 million, according to the Central Securities Depository of Turkey. During that period, the benchmark Borsa Istanbul 100 Index rose more than 800% in lira terms and 70% in dollars.
Since Simsek’s appointment a year ago, Turkey’s central bank has raised interest rates to 50% from 8.5% in a bid to control inflation and stabilize the economy. Following the monetary policy shift, he promised to support disinflation efforts with fiscal measures, especially as the government is forecasting a budget deficit of 6.4% of economic output this year.
The ministry introduced public spending cuts last month to reduce the budget deficit and announced plans for a minimum corporate tax rate as well as taxation of real estate income. New tax regulations will be addressed after parliament discusses legislation on cryptoassets this week, the ministry officials said.
--With assistance from Tugce Ozsoy.
(Updates with markets and money manager quote form the first paragraph.)
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