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Unjust distribution of the tax burden — a major component of economic inequalities in Turkey — has further exacerbated during the coronavirus pandemic, but far from looking for remedies, Ankara has recently hiked taxes that affect low- and middle-income groups the worst.
Budget performance data, released in mid-January, show that tax revenues in the central government budget totaled 833 billion Turkish liras ($117 billion) in 2020, with the bulk coming from indirect taxes levied on consumption. Indirect taxes, including the value-added tax (VAT), the special consumption tax and the special communication tax among others, brought in 551 billion liras ($77 billion), accounting for 66% of all taxes, up from 61% the previous year.
The increase was due to Ankara’s encouragement of cheap credit, especially in the second half of 2020, to stimulate consumption and resuscitate the pandemic-ravaged economy. As a result, indirect tax revenues exceeded the government’s target by more than 12%.
Despite the more-than-expected tax revenues, the government posted a budget deficit of some 173 billion liras ($24 billion) last year, which led to more borrowing and thus a swelling public debt stock.