IMF tells Turkey to go softly on VAT cuts

ANKARA (Reuters) – The International Monetary Fund firmly opposes Turkey making more VAT cuts, IMF representative in Turkey Hugh Bredenkamp told Reuters yesterday. Finance Minister Kemal Unakitan told reporters earlier in the day that the government could cut value-added tax on textiles and clothing while shielding budget balances against resulting revenue losses. «There is no way to cut VAT without a cost to the budget. Selective VAT cuts are, in general, we think very distortive and not good policy,» said Bredenkamp. «The Turkish government has told us that they have no intention of making further cuts in VAT under the new program. We hope that they will stick firmly to that policy,» he said. Turkey cut corporate tax to 30 percent from 33 percent and VAT on food, health and education to 8 percent from 18 percent on Jan. 1. Facing tougher competition from China, Turkish textile firms have asked the government to cut VAT on textile products to 8 percent from 18 percent now.

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