Security taxation will not go down to zero for Turk investors

ANKARA – Turkish investors should not expect their newly reduced tax rate on investments in shares and bonds to be cut to zero, the level now enjoyed by foreigners, the head of the semiofficial tax council said yesterday. The government’s cut in withholding tax rates for local investors to 10 percent from 15 percent came into effect on Sunday when the ruling was published in the Official Gazette. «The 10 percent withholding tax is a remarkably appropriate rate. In other countries, it is usually higher than this,» Tax Council Chairman Mustafa Uysal told Reuters in an interview. «There is no social policy reason for not taxing the incomes of local investors when you tax the minimum wage at 15 percent,» he said. The Turkish monthly minimum wage is 380 lira (200 euros). Many local investors have criticized the government for applying different tax rates for foreign and local investors and asked that rates be cut further to zero or 5 percent. The government introduced a 15 percent witholding tax rate for all investors at the start of this year. It scrapped it for foreigners this month as part of moves to help stabilize financial markets amid the turbulence which erupted in April after high inflation data and political tensions. Zero-tax for foreign investors makes sense at a time when Turkey is struggling to fund its current account deficit and sustain its high growth rates, some analysts said. «(If you tax foreign investors) then the transactions shift to other countries with more advantageous tax rates,» said Uysal. The current tax practice is right for alignment with the norms of the European Union, which Turkey aspires to join, and also will help make Istanbul a financial center, Uysal said. Every country will only be able to tax their own nationals when the European Union’s new regulations on taxation of savings take effect, he said. «Then we will not be able to tax foreign investors here and other countries will not have the right to tax our citizens.»