Turkey to keep fixed tax on alcohol, tobacco until year-end to ease inflation

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Turkey will keep a tax on alcohol and tobacco products unchanged until the end of the year, under a decree published in the Official Gazette on Friday, extending a practice that helps ease some upward pressure on inflation.

The fixed tax amount of the special consumption tax was kept unchanged in January from the level set in July 2020, as Turkey works to bring down inflation which has been stuck in double digits for most of the last four years.

The presidential decree published on Friday showed the fixed tax will be kept unchanged for another six months.

The alcoholic beverages and tobacco component makes up 6.06% of the inflation basket. Cigarettes make up a large part of that, with one of the highest weights in the basket.

Is Investment said in a note that the decision will lead to the omission of a 0.2 percentage point impact from alcohol and tobacco prices on inflation by year-end, but did not lower its forecast due to other upward risks.

The government has been raising prices and taxes only on items that would have a limited impact on inflation this year. The only exception so far has been a hike to fuel prices last month. 

Photo: A old man smokes a cigarette in front of a wall covered in a large Turkish flag in Sanliurfa, Turkey. EPA-EFE/ERDEM SAHIN

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