Turkey raises forex sales tax in another support for lira
May 15 2019 11:58 PM
A money changer counts lira banknotes at a currency exchange office in Diyarbakir, Turkey (file). The lira has shed some 13% of its value this year.

Reuters/ Istanbul

Turkey has raised a tax on some foreign exchange sales to 0.1 from zero, the country’s latest effort to discourage a months-long trend of Turks selling the lira for dollars and euros.
Analysts said the presidential decision on the so-called BSMV tax, announced in the Official Gazette yesterday, could boost government revenues by 1bn to 4bn lira ($165mn to $660mn) annually.
The BSMV tax would remain zero for transactions between banks, with the Treasury, and for those repaying foreign-currency loans to banks.
The move comes after days of intervention by state banks, which have spent billions of dollars in foreign markets to support the lira.
In a separate budget-boosting measure on Tuesday, Turkey raised taxes on lower-valued packages from abroad.
“The BSMV (Tobin Tax) on foreign exchange transactions has come back,” former Turkish central bank governor Durmus Yilmaz wrote on Twitter, referring to a tax on foreign currency transactions first suggested by the economist James Tobin.
Yilmaz, governor from 2006 to 2011 and now deputy leader of the opposition Iyi Party, said the main justification for the previous removal of the tax had been off-shore accounting of transactions.
The Turkish lira weakened to 6.0710 against the dollar by 1006 GMT from a close of 6.0355 on Tuesday, as investors worried about possible US sanctions over a Turkish plan to buy a Russian S-400 missile defence system. The forex tax rise did not appear to affect the lira yesterday.
The main Istanbul share index fell 1.48%, the banking index 1.68%.
“This step appears to be aimed at both raising revenues and to deter people from foreign currencies,” said Garanti Securities Coordinator Tufan Comert.
Foreign-exchange holdings of local individuals and institutions was $179.18bn as of May 3.
Brokerage Deniz Invest estimated tax revenues might rise by as much as $600mn and said the move was meant to “make speculative trade more costly.”
The BSMV tax had been set at 0.1% under a cabinet decision published in 1998. But in 2008 it was reduced to zero.
The lira has shed some 13% of its value this year, sparking a multi-pronged government reaction.
On Tuesday, a US House of Representatives committee released an early version of a spending bill that seeks to prevent the shipment of F-35 fighter jets to Turkey, as US officials press Turkey not to buy the S-400 system.

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