Turkey Increases Fuel Tax by 6 Percent to Tackle Inflation
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RDA Gulf Correspondent - . December 31, 2024
- . Update: January 3, 2025 10:20 am
The special consumption tax per litre for fuel has been raised by approximately 6%, according to a presidential decree published in the Official Gazette which publishes new legislation and official announcements. The decision reflects continuous changes in tax laws as part of larger fiscal measures meant to manage economic concerns.
The special consumption tax on fuel is adjusted every six months based on the producer price index. It plays a significant role in shaping overall price levels in the economy with the 5 month cumulative PPI. Since the last increase standing at 7.12%, the latest tax hike is below the index in comparison with 7.12%. Increases in fuel taxes have historically had a significant effect on inflation because they affect many different sectors.
Yesterday, Turkey implemented a 6% tax hike on fuel after its finance minister stated over the weekend that tax moves on fuel and tobacco would not impact the government’s inflation target.
On January 3rd when it is generally anticipated to rise, authorities will provide an update on the PPI. Inflation is usually significantly impacted by fuel taxes.
However, Finance Minister Mehmet Simsek stated on Sunday that gasoline and tobacco tax increases in the coming year will be structured so as not to impact the nation’s inflation forecast for 2025. His remarks were intended to reassure consumers and markets that budgetary policies will be in line with more general objectives for economic stability.
In November, Turkey’s annual inflation rate was 47.1% which was higher than anticipated but the lowest since the middle of 2023. According to a Reuters survey, it will decrease to 26.5% by the end of 2025 which is higher than the 21% predicted by the central bank.
