Turkish value added tax (VAT) rate on leasing has forced MAN
Financial Services to suspend the establishment of a leasing
division in Turkey this year.
Effective January 1, VAT on all leasing activity in Turkey was
adjusted upwards to 18 per cent from 1 per cent, prompting an
outcry from the financial services sector and business groups.
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Semih Pala, general manager of MAN Finance in Turkey was quoted
by the Turkish Daily News as saying the Turkish leasing market has
lost its appeal due to the latest changes.
“MAN Group has been conducting feasibility studies in the
country for the establishment of MAN Leasing. However, we suspended
the project which was expected to start operations in 2008, due to
the increase in VAT rates for all leasing activities,” Pala said in
a written statement. “As MAN Group, we are reconsidering and
analysing recent developments.”
The Ankara Chamber of Commerce (ATO) has also spoken out against
the VAT increase. Chairman Sinan Aygün said he had sent a letter to
Prime Minister Recep Tayyip Erdoðan pleading him to step back from
the decision, which is seen as a major obstacle for small and
medium-sized enterprises.
According to Zaman, Turkey’s main daily, the Finance Ministry
had felt that the 1 per cent tax rate in leasing had been widely
abused.
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By GlobalDataAgreeing that leasing has become a channel for embezzlement,
Aygün said the rate increase was not the only way to solve the
problem. He suggested setting a high rate only for luxury items,
like expensive passenger cars, aircraft and yachts.
Pressure from businesses may not be able to reverse the decision
but Zaman reported that officials were considering
lowering the VAT to 8 per cent. Financial markets bid up Turkish
leasing stocks this morning on the news.
Turkish businessmen became familiar with leasing just a decade
ago, and this form of financing is seen as having huge potential
for growth, Zaman reported.
In the EU, investments through leasing make up 15 to 20 per cent
of the total investment stock per year compared with just 7 per
cent in Turkey. Businessmen worry that the VAT increase will stifle
growth of the business. The Turkish leasing industry was valued at
US$12 billion last year, with 36,600 transactions, according to
Zaman.
