New crisis package revives hopes for recovery
Posted by meb at March 15th, 2009
A fourth stimulus package announced by the government has raised hopes that the markets will take a deep breath amid the uncertain atmosphere caused by the ongoing global financial turbulence.
The new package, the total cost of which is expected to be TL 5.5 billion, brings noteworthy tax cuts and incentives to help troubled sectors. The package will go into force following Cabinet approval, expected to take place soon.
Within the fourth stimulus program, the value-added tax (KDV) for the purchase of apartments over 150 square meters in size will be reduced from 18 percent to 8 percent. The government is also going to allocate TL 500 million to Eximbank, a state-controlled bank set up to support exporters, to help minimize the financial burden on Turkish exporters. The government will allocate an additional TL 75 million for agriculture. The package also foresees a reduction in the private consumption tax (ÖTV) for automobiles and home appliances.
Leading figures from the Turkish business world said they welcomed the fourth package. İstanbul Chamber of Commerce (İTO) President Murat Yalçıntaş said the government was taking the right step against the crisis and that small businesses will be relieved by the incentives introduced in the package. Turkish Union of Chambers and Commodity Exchanges (TOBB) President Rifat Hisarcıklıoğlu said he believed the package will help reinvigorate domestic markets. Bursa Trade and Industry Chamber (BTSO) General Manager Celal Sönmez noted that the package was “encouraging” for the future of the markets. In particular, he said, the construction and agriculture sectors will see benefits as a result of the package.
Oyak Yatırım analyst Cemal Demirtaş said the government should quickly put the precautions into action, making the details of the package clear. He said the ÖTV reduction for automobiles can help enhance local car production. Soyak Holding Assistant Manager M. Emre Çamlıbel said the KDV cut for real estate would to some extent trigger the sale of luxury apartments. Banu Kıvcı Tokatlı, Finans Yatırım chief economist, said the new incentives will provide support for the real estate, auto and home appliances sectors, which were battered by the crisis more than any other sector, preventing the recession from becoming deeper.
However, some automotive sector representatives are not satisfied with what the package has brought for them. Hyundai Assan CEO Ali Kibar said car sales in Turkey would increase only for a limited period and that the government should therefore introduce incentives for those seeking to get rid of their ageing vehicles following the end of the next three-month period. Tofaş CEO Ali Pandır said the action plan should take effect as soon as possible, stressing that any delay will create further stagnation in the markets. Automobile Distributors’ Association (ODD) President İbrahim Aybar asserted that the ÖTV cut for the automotive sector was not at a level that would increase morale in the sector.
Meanwhile, Prime Minister Recep Tayyip Erdoğan said during a local election campaign meeting in Eskişehir on Friday that the government cannot be held solely responsible for the crisis since it was created by external factors. Reacting to opposition parties’ criticism that the government failed to take effective steps against the crisis, the prime minister said the government had introduced a series of incentives to deal with the crisis from the very first day. “We accelerated public investment, including the construction of highways and the Southeastern Anatolia Project [GAP] and also reduced employer insurance premiums by 5 percent,” he said, adding that the central bank’s moves to reduce interest rates and a “wealth amnesty” program were critical in reviving the markets.
Car prices down by 25 percent with ÖTV reduction
With the fourth stimulus package, the private consumption tax (ÖTV) on motor vehicles will be reduced, while the ÖTV on home appliances will be entirely removed for a three-month period. The ÖTV on motor vehicles with engines of up to 1,600 cc will be cut to 18 percent from the current 37 percent; the tax on vehicles with engines of between 1,600 cc and 2,000 cc. will be set at 40 percent, down from 60 percent. Accordingly, an automobile priced at TL 20,000 will sell for TL 15,700. The ÖTV on home appliances will be zero during the next three months; it was 6.7 percent. Thus, with this tax reduction people will be able to buy a refrigerator worth TL 1,000 for TL 900.
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