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).
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
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.