Turks initially paid 2.52 lira tax per liter of petrol, or less than 9 euro cents. That has now almost tripled to 7.52 lira per litre, while the tax on diesel rises from 2.05 lira to 7.05 lira. Due to the higher tax, the VAT will also increase, so that motorists will pay about 6 lira more per liter at the pump. This will make fuel about 20 percent more expensive.
The Turkish government can use the extra income because of the enormous damage caused by the earthquakes. That disaster, which killed more than 50,000 people, is estimated to cost Turkey more than $100 billion. The government therefore wants to be able to spend a lot of extra money this year. The Turkish parliament approved a budget plan for this on Saturday.
But Turkey has been suffering from very high inflation for some time now. According to the latest figures, prices across the board are 38 percent higher than a year ago. That is less extreme than the almost 90 percent inflation of a few months ago. But this decline was partly caused by all kinds of benefits that President Recep Tayyip Erdogan handed out in the run-up to May’s presidential elections. The latter is also one of the reasons for the increase in the budget deficit, as a result of which the government now needs extra money.
For years, Turkey did little to bring inflation in the country under control. What matters is that the Turkish president did not believe in the standard economic practice of raising interest rates to limit inflation. Instead, he hoped to attract investment and thus strengthen the economy.
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2023-07-16 16:43:25
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