Turkey plans to tax bank deposits

The Turkish government is looking into the possibility of taxing bank deposits depending on their maturity, Turkish Finance Minister Mehmet Simsek said late on Sunday. Simsek also said domestic demand was seen easing to more moderate levels and he expects inflation to fall towards target levels from the second half. The central bank’s year-end inflation target is 5 per cent. The minister also said the current account deficit is improving slowly. Simsek said privatisation revenues were expected to reach 10.5 billion lira ($6 billion) this year. Simsek also said that fund inflows to Turkey from the Gulf and other regions was expected to remain strong in 2012. Turkey is considering tax changes to persuade depositors to place money with banks for longer, a move that would in turn help banks lend to corporates on a longer-term basis, Finance Minister Mehmet Simsek added. Firms Turkish firms have been able to maintain borrowing from domestic banks, but most funds are lent on a short term basis, curtailing corporates’ ability to invest despite the economy’s rapid growth. Currently, there is a 15 per cent withholding tax applied to bank deposits for all terms, but Simsek said his ministry was looking into lowering the tax for longer term deposits and raising it for shorter term deposits. “We will transfer authority to decide on taxing deposits to the cabinet, then we’ll do what is necessary when the right time comes,” Simsek said in an interview late on Sunday. The law specifying a 15 per cent tax rate will need to be amended by parliament to allow the cabinet to change the rate. Turkey hopes to raise $6 billion from privatisation this year, Simsek said, in line with government’s medium term plan, announced last October, despite an international funding crunch. It will be a big jump from 2011, if it succeeds. The government completed privatisation tenders for $1.36 billion in 2011, but it has so far received just $350 million of those funds. The minister said he expected a budget contribution of 10.5 billion lira from privatisation proceeds in 2012, which along with proceeds earmarked for muncipalities was in line with the 12.5 billion lira envisaged in the medium term economic plan. Reduced lending from international banks has thinned out potential buyers for privatisation offerings, and the winners of tenders have often been unable to come up with the funds.