Turkey raises forex sales tax in another lifeline for lira
By Can Sezer and Nevzat Devranoglu
ISTANBUL, May 15 (Reuters) - Turkey has raised a tax on some foreign exchange sales to 0.1% from zero, the country's latest effort to discourage a months-long trend of Turks selling the beleaguered lira for more stable dollars and euros.
Analysts said the presidential decision on the so-called BSMV tax, announced in the Official Gazette on Wednesday, could boost government revenues by 1 billion to 4 billion lira ($165 million to $660 million) annually.
The move comes after days of intervention by state banks, which have spent billions of dollars in foreign markets to support the lira. In a separate budget-boosting measure on Tuesday, Turkey raised taxes on lower-valued packages from abroad.
"The BSMV (Tobin Tax) on foreign exchange transactions has come back," former Turkish Central Bank Governor Durmus Yilmaz wrote on Twitter, referring to a tax on foreign currency transactions first suggested by the economist James Tobin.
Yilmaz, governor from 2006 to 2011 and now deputy leader of the opposition Iyi Party, said the main justification for the previous removal of the tax had been off-shore accounting of transactions, notably in Bahrain.
"Governments which are unable to protect the standing of a currency by controlling inflation try to keep citizens away from foreign currencies with tax," he said.
The Turkish lira weakened to 6.0710 against the dollar by 1006 GMT from a close of 6.0355 on Tuesday, as investors worried about possible U.S. sanctions over a Turkish plan to buy a Russian S-400 missile defence system.
The forex tax rise did not appear to affect the lira on Wednesday. The main Istanbul share index fell 1.48%, the banking index 1.68%.
"This step appears to be aimed at both raising revenues and to deter people from foreign currencies," said Garanti Securities Coordinator Tufan Comert.
Since last year's currency crisis, when the lira lost as much as half its value against the dollar, a loss of confidence among local investors has pushed up foreign-currency deposits and funds including precious metals over the last six months.
Foreign-exchange holdings of local individuals and institutions was $179.18 billion as of May 3.
Brokerage Deniz Invest estimated tax revenues might rise by as much as $600 million and said the move was meant to "make speculative trade more costly."
The BSMV tax had been set at 0.1% under a cabinet decision published in 1998. But in 2008 it was reduced to zero.
The lira has shed some 13 percent of its value this year, sparking a multi-pronged government reaction.
On Tuesday, a U.S. House of Representatives committee released an early version of a spending bill that seeks to prevent the shipment of F-35 fighter jets to Turkey, as U.S. officials press Turkey not to buy the S-400 system.
The currency had gained on Tuesday as investors weighed up reports that Ankara was evaluating Washington's proposal to delay delivery of Russian defence systems and state banks continued to sell dollars to support the currency.
($1 = 6.0430 liras)