Turkey Vows No Tobacco Tax Hikes to Contain Inflation

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Turkey’s Finance Minister Naci Agbal speaks during an interview with Reuters in Ankara, Turkey, September 27, 2016. Picture taken September 27, 2016. REUTERS/Umit Bektas

Ankara- the Turkish government has decided not to impose new taxes on cigarettes in 2017 in a bid to contain inflation.

Finance Minister Naci Agbal made the announcement on Friday as the government continues to struggle with double-digit growth in annual consumer prices.

The Turkish government has recently announced a number of measures aiming to ease the rising inflation rate, and it announced on June 30 a decision not to increase the tax on tobacco in the second half of the year. 

The government has also cut customs taxes in meat and in a number of grains that have a direct or indirect impact on the prices of red meat, white meat, bread and eggs, including wheat and corn, in a bid to ease rising food prices.

Inflation hit an 8.5-year high last month, touching 11.72 percent, mainly due to gradual increases in food prices, despite a slight regression in recent weeks. 

“We have been acting in a very careful manner in our fiscal and monetary policies to limit the inflation rate in pre-forecasted levels by the year-end,” Agbal told Reuters.

“Cigarettes have a significant share in the inflationary basket. The hikes in cigarette prices last year had an impact on our 2016 inflation rate and created a base effect for this year. In a bid to prevent the inflationary effects from these sources, we have decided not hike taxes in such products,” he added. 

Turkey makes price hikes in alcohol products and tobacco products twice a year according to their share in the domestic producer price index. 

The share of these products in the inflation basket is 5.87 percent and price hikes in these products last December had a significant impact on the headline inflation figure in that period. 

“Our fiscal policy will play a supportive role in helping our monetary policy to achieve its goals. In using our fiscal policy tools, the inflation target will be a priority target to consider,” Agbal said. 

He also noted that the decision not to increase taxes in tobacco and cigarette products would likely cost around 60 million Turkish Liras to the budget.

Also Friday, the Turkish Statistical Institute (TurkStat) said that the country’s foreign trade deficit rose 43.4 percent in May against the same month in 2016.

The monthly deficit was $7.3 billion as imports increased by 21.7 percent year-on-year to $20.9 billion while exports went up 12.5 percent to $13.6 billion, TurkStat said.



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