Prices expected to fall after value-added tax cuts

The effect of the recently announced tax cuts on prices is expected to be seen in the next two weeks, people from the retail industry have said.

President Recep Tayyip Erdoğan said earlier this week that the government decided to reduce the value-added tax (VAT) on a wide range of products, mostly necessaries, such as hygiene products, toilet papers and baby diapers.

The VAT for those items has been slashed from 18 percent to 8 percent.

“This is a welcome development both for consumers and companies. We are expecting prices to decline in a short period of time, probably in two weeks,” Ahmet Pura, the head of the Cosmetics and Cleaning Products Industry Association (KTSD), told daily Milliyet.

Bendevi Palandöken, the head of the Turkey Tradesmen and Artisans Confederation (TİSK), agreed that retailers would swiftly reflect the tax cut onto the prices.

“This was a timely move which may help people have easier access to hygiene products as the COVID-19 pandemic continues,” Palandöken said.

He recalled that the previous VAT cut on food products was beneficial to consumers. “However, due to the economic effects of the Ukraine-Russian war and problems arising from higher input costs, people felt that they did not really benefit from this tax cut.”

People from the construction industry also voiced optimism that the VAT reduction may give a boost to the sector.

As part of the new tax scheme, the VAT has been set at 8 percent in the sales of houses that are smaller than 150 square meters in size.