Turkey, inflation, food prices

Turkish government cuts VAT on food to curb inflation

Erdoğan announced measures to “reduce inflation below 10% by 2023”, and heavy fines for companies and stores that do not lower prices.

Turkish government announced a significant reduction in VAT on basic foodstuffs to curb inflation, during the presentation made on Saturday by the new economy minister Nureddin Nebati of a new package of economic measures, with which Turkey seeks in addition to curb the escalation of prices, also to increase production and exports.

As explained by Turkish President Tayyip Erdoğan himself, the value added tax (KDV, in Turkish) will be reduced from Monday from 8% to 1% on basic food products, including fruits, vegetables or oil. “As part of the VAT (KDV) simplification system, we are going to reduce it in the basic food basket from 8% to 1%. We have already applied it to flour and bread,” Erdoğan announced on February 12 via video conference, during Nebati’s presentation of the new economic measures.

In addition to the tax discount, Erdoğan added that the government has the “expectation” from companies to reduce their prices from this Monday by 7% on food, to reflect the VAT reduction; precisely, to guarantee that the tax reduction is applied, groups of inspectors will be created to monitor prices, and there will be a mobile application through which citizens will be able to search for the cheapest prices.

For his part, the Turkish Trade Minister, Mehmet Muş, confirmed yesterday that those companies and businesses that do not apply the VAT reduction in the prices of their products will face harsh sanctions. “Citizens should have no doubt that we will impose the most severe fines on shops that do not reflect the VAT reduction in their prices, and afflict our citizens with abusive price increases,” Muş said, also announcing a increase of inspections.

“All these (tax) reductions will help in our fight to curb inflation,” said the Turkish president, who promised to take all necessary steps to prevent “inflation from crushing our nation.” Erdoğan also stressed that this reduction in VAT on food is part of the Turkish government’s measures to “make sure that inflation falls below 10% by 2023“, the year in which Turkey celebrates the first centenary of the birth of the Republic; in 2023, presidential and parliamentary elections in Turkey are planned, too.