Turkish textile manufacturers welcome10 pct VAT cut as vital

ISTANBUL (Reuters) – Turkey’s vital clothing sector, facing growing competition from cheap Chinese exports, has welcomed moves by the government to cut VAT as a positive step toward supporting what is a key foreign currency earner. Aynur Bektas, president of the Turkish Clothing Manufacturers’ Association, said Turkey also needs to ease the tax burden, lower energy costs and curb unregulated trade to boost the sector’s fortunes. «This is a very important step but the government needs to address the other issues,» Bektas said in an interview yesterday, after meeting with Prime Minister Recep Tayyip Erdogan earlier this week to call for support measures. Turkey’s clothing exports amounted to nearly $14 billion last year, approaching 20 percent of total exports. Foreign Trade Minister Kursad Tuzmen said on Thursday Turkey was planning to cut VAT on textiles by 10 percentage points to 8 percent to counter the growing flow of Chinese goods into global markets. Turkish clothing manufacturers say thousands of jobs are at risk due to rising energy costs and increased competition from China since the abolition of global textile quotas last year. The International Monetary Fund, with which Turkey has a $10 billion loan accord, has previously opposed moves to cut taxes on textiles, arguing that this would endanger budgetary targets by cutting revenues by one billion lira ($767 million). Bektas said Turkey had so far weathered the challenge from China, with clothing exports growing nearly 5 percent last year in defiance of World Trade Organization (WTO) forecasts that they could fall as much as 30 percent. «They were wrong about Turkey because it has repositioned itself by raising its quality. It is now producing value-added products. That has saved us,» she said.