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    Turkey expects EU to open tax chapter after concession

    Anatolian Agency
    25.04.2009 - 00:00 | Son Güncelleme:

    ANKARA - After slashing the private consumption tax, or ÖTV, on whiskey and vodka, the Turkish government also has promised to lift its "Tobacco Fund" gradually, expecting the European Union to open membership talks in the tax chapter in return.

    When it closed the tax chapter last year, the EU demanded that Turkey should tax alcoholic beverages only "according to their alcohol levels," while it should also abolish its "Tobacco Fund" before the chapter is reopened.

    Acting upon this warning, the government last week changed the ÖTV regime for alcoholic beverages. Proportional taxes were abolished, and fixed taxes were rearranged. The minimum fixed ÖTV for whiskey was reduced to 60 Turkish Liras per liter, from 70.92 liras. For gin and vodka, the minimum fixed ÖTV was reduced to 40 liras, from 41.42 liras per liter. The fixed ÖTV for rakı, the national beverage, meanwhile, was raised to 36 liras per liter, from 35.84 liras.

    Speaking to the Anatolia news agency, officials said EU bureaucrats said the fixed ÖTV could be pulled down further for whiskey and vodka, while they did not insist on raising taxes for rakı.

    Abolishing the Tobacco Fund
    Turkey also delivered a schedule to abolish its "Tobacco Fund," which the EU said should be lifted if the tax chapter is to be opened.

    The "Tobacco Fund" deduction currently stands at $3,000 per each ton of imported tobacco, contributing $200,000 to the national budget annually. The schedule foresees the gradual removal of this tax, from 2010 to 2018. "We have ended proportional tax in high-alcohol drinks, also reducing the ÖTV, displaying our goodwill," said one Turkish official, speaking on condition of anonymity. "The Tobacco Fund deduction will also end gradually. The EU should now start the tax chapter negotiations."

    "In rakı, our stance is clear," the official said. "In uzo, the national beverage of Greece, the country uses a one-to-two tax balance with other high-alcohol beverages. Greece gained this right as one that continues after EU membership. When [Brussels] appealed, the Court of Justice found Greece right."

    In early negotiations, Turkey requested that the EU give Turkey the same right for rakı. "We are not a member of the EU yet," the official said. "In the long term, we may close the gap between taxes further, but we have taken an important step even today. We have promised that we will abolish the Tobacco Fund completely. Now the ball is in Brussels’ court. We are expecting the tax chapter to open after all these steps."
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