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Tax increased: Erdogan makes German luxury cars more expensive in Turkey

A BMW, Porsche or Mercedes costs a small fortune anyway. In Turkey, however, these cars will be significantly more expensive. Because President Erdogan has increased a special tax - with drastic consequences.

Turkey is currently in a serious economic crisis: the gross domestic product has collapsed dramatically as a result of the corona pandemic, inflation is very high, and the Turkish lira is (almost) worthless. That is why Turkish President Recep Tayyip Erdogan wants to take countermeasures and collect taxes - with a measure that also affects the German auto industry.

Erdogan has raised the special consumption tax (Turkish: Özel Tüketim Vergisi), a special tax on certain consumer goods such as cars and refrigerators, by decree.

The result: local Turks now have to pay a fortune, especially for imported luxury cars, which previously cost a lot. The only exceptions are war veterans or people with disabilities.

Tax rises to 220 percent

For vehicles with a displacement of more than two liters and a tax assessment base of 170,000 lira (around 19,000 euros), the tax increases from 160 to a whopping 220 percent. In plain language this means: Buyers have to pay more than double the net list price. Added to this is the value added tax of 18 percent.

In addition to the additional tax revenue, Erdogan is pursuing another plan with the higher special taxes, as the managing director of the German-Turkish Chamber of Industry and Commerce (AHK Turkey), Thilo Pahl, told t-online: "The aim is to create incentives to buy locally produced cars promote and reduce imports. " Imports are already severely affected by the weak lira.

Erdogan presented its own brand

80 percent of the cars produced in Turkey are intended for export, the majority of the cars sold in Turkey are imported. Turkey no longer has its own brand: the exported cars are built by other manufacturers such as Fiat, Renault or Peugeot.

Erdogan wants to change that as soon as possible: In 2017 he announced his own electric car brand, it's called Togg. A consortium of five Turkish companies has come together for this purpose. The plan is for the first cars to roll off the production line in 2022.

A first prototype was presented at the end of 2019. "Today we are experiencing a historic day for our country," said Erdogan proudly at the time.

That is how expensive a BMW is in Turkey

By the way, pure electric cars are taxed significantly less. But most of the German models still run on petrol and not on electricity. The tax increase therefore has a significant impact, as the "Handelsblatt" calculates.

A 7-series BMW, a luxury sedan, starts in Germany with a base price of around 87,300 euros. So far, according to the list, the car in Turkey cost the equivalent of around 198,000 euros. After the tax increase, a price of the equivalent of 264,000 euros will be due.

The tax was also increased for cheaper cars - but not so drastically. According to "Handelsblatt", for example, a VW Passat, which costs around 30,000 euros in Germany, costs almost 11,000 euros more in Turkey, namely 40,700 euros. Previously, the price was already 36,200 euros.

"Economic relations are based on a broad foundation"

The AHK Turkey, based in Istanbul, is now sounding the alarm. "There is a risk that the market will become smaller as a result and thus the sales opportunities for German luxury vehicles in Turkey will possibly decline," said AHK managing director Pahl t-online.

However, only a small part of the total trading volume will be affected by the tax increase. The German companies Porsche, BMW and Mercedes did not even appear in the statistics of the best-selling cars for 2018. Only VW took third place with almost 50,000 cars.

Thilo Pahl therefore states: "Overall, German-Turkish economic relations are based on a broad foundation."

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  • Subjects:
  • Economy,
  • Industries and companies,
  • Recep Tayyip Erdogan,
  • Turkey,
  • Electric car,
  • Gross domestic product,
  • Corona pandemic,
  • Tax income,
  • Car industry,
  • Tax increase,
  • Economic crisis,
  • VW Passat,
  • BMW,
  • VW,
  • New car,
  • Consumer goods,
  • Value added tax,
  • Porsche,
  • Mercedes,
  • Turkish lira