The Turkish budget for 2005 came into force on January 1. The
budget fixes expenditure for 2005 at about NTL154 billion ($115
billion), against expected revenues of about NTL124.3 billion ($93
billion). The difference between expenditure and revenue will be
funded through borrowings.
According to the budget, scheduled projects for 2005 can only
begin if at least 10% of the feasibility amount is allocated in the
budget for the project concerned. This excludes certain
hydroelectric power plant and dam construction projects, which are
financed by foreign funding through bilateral cooperation
agreements.
The budget stipulates that the total amount of Treasury
guarantees cannot exceed $2 billion. It also states that Treasury
guarantees against financing instruments issued by public entities
cannot exceed $2 billion, but that the Council of Ministers is
authorized to increase this amount to $4 billion. Agreements
entered into by public companies to procure services and good using
foreign financing must first be approved by the Ministry of
Finance.
The Investment Plan for 2005 has been announced in the Official
Gazette. It states that public sector investments in agriculture
will be NTL1.3 billion ($1 billion), in mining NTL506.2 million
($380 million), and in manufacturing NTL614.9 million ($460
million).
IMF developments
On May 11, the executive board of the IMF approved Turkey's
letter of intent dated 26 April. Thus Turkey will have access to
$10 billion over the next three years. The IMF and the Turkish
government had reached an understanding on the programme and the
principles of the new standby arrangement in December 2004, but the
Turkish government has been reluctant to issue the letter of
intent. The IMF's executive board requested progress on key pieces
of legislation, including: restructuring the tax administration and
tax policy reforms - the president had vetoed only one article of
the law; the new financial services legislation (sent to the
sub-commission for review by parliament); and social security
reform (which has been postponed for two to three weeks).
The government is committed to the economic programme,
maintaining the primary surplus target 6.5% of GNP and to
harmonizing Turkish legislation with EU legislation, but
authorities need to reach a consensus about certain outstanding
issues. One of these issues is the draft financial services
legislation, which has been long discussed but does not yet
represent a strong consensus by the relevant parties. The Banking
Regulation and Supervision Agency, Banks' Association and the
government reportedly fail to agree on several issues, including
monitoring authorities over banks.
Stamp tax developments
Amendments have been made to the Stamp Tax Law, effective
January 1 2005. The method of affixing stamps for the payment of
taxes has been abolished. Taxpayers will have to submit monthly
declarations of stamp tax on the 20th of the following month and
pay the accrued amounts on the 26th.
In addition to the procedural changes, certain documents are
exempt from stamp tax, such as letters of credit, loan letters,
telegrams and advance receipts. Stamp tax duties have been
abolished for contracts, letters of conveyance and commitment
letters, surety, guarantee and collateral bills that do not bear
monetary value, proposal letters, and transfer, payment, delivery,
dispatch and collection orders between banks and undertakings.
Contracts between real persons not related to business or
professional activities are exempt from stamp tax. However, if any
of these documents are submitted to public offices or notaries,
stamp tax will accrue as of the submission date and the submitting
party will pay tax.
Because the envisaged dates will be the same for stamp, VAT and
withholding tax declarations and payments, the tax burden of
companies and cash outflow will inevitably increase in the last
weeks of each month.