Turkey is introducing a value-added tax (VAT) cut on several products to counter inflation, the country’s president announced Monday, including hygiene products and medical equipment.
“We have decided to reduce the VAT of products such as detergent, soap, toilet paper, napkins and baby diapers from 18% to 8%,” President Recep Tayyip Erdoğan said.
Turkey’s annual consumer price index (CPI) jumped more than expected to a two-decade high of 54.4% in February.
In a televised address following a Cabinet meeting Monday, Erdoğan said they were also introducing a VAT simplification in housing and land plots.
The tax on residential properties whose net area does not exceed 150 square meters (1,614.5 square feet) will be applied as 8%, he noted.
“VAT will be applied as 8% for the first 150 square meters of residences above this size and 18% for the part exceeding this size,” Erdoğan said.
For residential buildings covered by the law on the transformation of disaster risk areas, VAT of 1% will be charged for up to 150 square meters and 18% for parts exceeding it.
Turkey will also ease the financing burden on the construction sector by reducing the VAT rate on land and plots to 8%, Erdoğan said.
On the other hand, he said the tax has been increased to 18% from 1% on the profit that car dealers make from the sale and purchase of vehicles and on sales of yachts and boats.
In an effort to soften the impact on households, the government last month cut tax on basic goods to 1% from 8% and subsidized a significant amount of electricity bills.
It also announced a tax cut on electricity used for residential and agricultural irrigation purposes to 8% from 18%.
Inflation has surged since last fall amid soaring global commodity and energy prices and as the lira weakened after the central bank in September embarked on an easing cycle, which saw its policy rate being slashed by 500 basis points to 14%.
The policy easing came as the government endorses a new economic program that prioritizes growth, investment and exports while keeping rates low.
Turkey's energy bill also surged last year as global prices and demand rose, leading Ankara to hike energy prices at the start of the year, including a 50% hike in electricity prices for lower-demand households.
To help offset the burden, the government announced a 50% hike in the minimum wage for this year.
