Ankara to cut its corporate tax further

ANKARA (Reuters) – Turkey plans to cut corporate tax by 2-3 percentage points from the current 30 percent at the start of 2006, Finance Minister Kemal Unakitan told Reuters in an interview yesterday. He also said Turkey’s 2005 budget deficit may be 8-9 billion lira (4.83-5.43 billion euros) lower than the government’s 29-billion-lira target. The corporate tax cut is aimed at aligning Turkey with rival emerging economies, such as the Czech Republic, Poland and Hungary, and bolster foreign capital investments, Unakitan said. «We are working to reduce the corporate tax by 2-3 points. We cut the rates by three points in early 2005 in the battle against countries with which Turkey is competing to draw foreign investment,» he said. Unakitan said the budget would run a surplus in November. «We projected a 29-billion-lira deficit in the budget for this year, but if we consider we will run a surplus in November, then we expect the deficit to come in 8-9 billion lira lower,» he said. The government would be careful not to endanger the primary surplus target with tax cuts, he noted. «We cannot make concessions on the primary surplus.» He added the government would take important steps toward overhauling the tax system with the country’s first three-year budget in 2006-2008. Unakitan also said foreign investors had problems with the new taxation system for financial instruments, to be introduced on January 1, 2006, and the government was in talks to solve these. Turkey has signed agreements with many Western countries to prevent double taxation, and foreign investors want to benefit from these, he said, but stressed that cutting the 15 percent withholding tax on financial instruments was not under consideration.