Turkey has raised price thresholds for a special consumption tax on vehicles with small combustion engines, while adding more categories, according to a presidential decree published in the Official Gazette on Thursday, a move that will help cut vehicle prices.
A 60% tax rate is to be levied on vehicles with engines smaller than 1,600 cubic centimeters (cc) (97.6 cubic inches) in a price band of TL 150,001 to TL 175,000, ($11,136 to $12,992) after the adjustment.
The rate rises to 70% for vehicles that cost up to TL 200,000 and 80% for those priced above TL 200,000.
Previously, all cars that cost more than TL 150,000 were subject to the 80% rate.
The maximum price for the tax rate of 45% was raised from TL 92,000 to TL 120,000, and the threshold for the 50% tax rate was raised to between TL 120,000 and TL 150,000.
Passenger vehicles sold in Turkey, already under a large tax burden, will see prices decrease as a result of the move, though the benefit is likely to erode quickly as sellers are expected to hike prices because of a depreciation in the Turkish lira.
Sales of passenger cars and light commercial vehicles in Turkey fell 4.6% to around 737,350 units throughout 2021, according to data from the Automotive Distributors Association (ODD) on Wednesday. Sales in 2020 stood at nearly 773,000.
In December, sales were down 40.3% year-over-year to 62,243, down from 104,293 units in 2020.
Sales have declined in the past months due to supply issues caused by the coronavirus pandemic and high loan rates, amid a slide in the lira.