Turkey has unveiled details of a broad package of incentives aimed to boost competitiveness and attract investment, and also position its biggest city Istanbul as a leading financial gateway across the region.
At a press conference Monday, Finance Minister Mehmet Simsek said Turkey was extending a tax exemption on services exports to 100% to target high-value sectors like software, gaming, medical tourism.
At the same time, it is reducing manufacturing exporters’ corporate tax rate to 9% to boost competitiveness and attract foreign direction investment (FDI), he said.
The tax reductions are long-term and “here to stay,” he told reporters, days after President Tayyip Erdogan first floated the comprehensive legislative package including the tax plans.
The package aims to bolster an economy that officials hope is emerging from a years-long inflationary crisis that cut deeply into individuals’ and companies’ savings and earnings, prompting many Turks to seek stability abroad. Inflation was above 30% last month.
Ankara introduced it at a time that the US-Israeli war with Iran rattled Gulf states, prompting some companies and banks there to consider other options. Asked about this, Simsek said the package was not meant to take advantage of war fallout and was in the works long before.
Some of the incentives, including zero corporate income tax on transit trade, are focused on the companies located in the Istanbul Financial Center (IFC), a new state-backed clutch of glassy towers on the city’s Asian side.
The rate is 95% for those located outside the IFC, Simsek said, noting it was set at 50% in years past.
The package aims to “export more goods and services, attract more talent, entrepreneurs, capital, a new home that’s more encouraging local citizens to use Turkey as a center of their activities and … placing IFC as one of the key regional hubs,” he said.
This month, the IFC’s chief executive Ahmet Ihsan Erdem told Reuters that the Iran war prompted dozens of companies with operations in the Gulf to consider moving business there.
The exporter incentives include what Simsek called a “radical step” toward reducing the corporate tax rate. [Reuters]