Turkish govt seeks to defend tax to fund defence industry

The Turkish government sought on Tuesday to defend a proposed tax on credit cards that is designed to fund the defence industry, after cardholders scrambled to avoid the new levy.

"Our country has no choice but to increase its deterrent power. There's war in our region right now. We are in a troubled neighbourhood," Finance Minister Mehmet Simsek told private broadcaster NTV.

The ruling party submitted a bill to parliament on Friday stipulating that people with a credit card limit of at least 100,000 liras (close to $3,000) will have to pay an annual 750 lira ($22) in tax from January 2025 to bolster the defence industry.

Indignant Turks, who already face double-digit inflation, reacted by ringing their banks to lower their credit limits.

"The purpose (of the bill) is obvious," Simsek argued.

"If we increase our deterrent power, then our ability to protect against fire in the region will increase."

Turkey's defence industry has enjoyed a boom in recent years but the minister said the sector needed strengthening further.

Turkey's defence companies signed contracts in 2023 worth a total of $10.2 billion, according to Haluk Gorgun, the head of Turkey's state Defence Industry Agency (SSB).

The top 10 Turkish defence exporters contributed nearly 80 percent of total export revenue, he said.

Sales of Turkish Baykar drones, used in conflicts from Nagorno-Karabakh to Ukraine, amounted to $1.8 billion.

Official data from the SSB showed that Turkish defence and aviation exports surged 9.8 percent in value in the first eight months of 2024, reaching $3.7 billion.

The ruling party's credit card bill sparked annoyance among Turks already struggling with high inflation.

Inflation has spiralled over the past two years, peaking at an annual rate of 85.5 percent in October 2022 and 75.45 percent in May 2023.

Official data showed it slowed to 49.4 percent in September.