Bloomberg/Kostas Tsirinos

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Turkey re-imposes 0.1 per cent tax on some foreign-currency sales

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The levy, kept at zero for over a decade, will be introduced on foreign-currency sellers and it will not apply to the interbank market as well as credit transactions.

Thursday 16, May 2019

(Bloomberg) --Turkey will reintroduce a 0.1% tax on some foreign-currency transactions in a move that will increase budget revenue but risks raising concern that the government is taking on a larger role in managing the market.

According to central bank data, the average trading volume in the local foreign-exchange spot market was $3.6 billion in April.

Turkey has resorted to increasingly heavy-handed tactics to steady the lira, even engineering a currency crunch before March elections by pressuring local lenders not to provide liquidity to foreign investors. Still, officials have repeatedly denied any plans to impose capital controls.

Guillaume Tresca, Senior Emerging-Market Strategist at Credit Agricole, said, “It sends the wrong signal to the markets, the risk is it could deter further appetite from foreigners to invest in Turkey.”

Erkin Isik, Chief Economist at QNB Finansbank, said that the government could add an estimated TRL 200 million ($33 million) in monthly revenue to the budget, or about TRL 1.5 billion for the remainder of the year.

Exemptions from the tax include sales to Turkey’s treasury as well as transactions between banks or authorised institutions and sales by banks to a borrower related to repayment of foreign-currency loans.

 

TAGS : foreign-currency sales, CBRT, Lira, President Recep Tayyip Erdogan

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