Turkish automakers' stocks show sharp rise as tax cuts take effect

Tofas advanced the most in nine weeks, adding more than 5 percent in the first trading session later lost its early gains and closed 1.5 percent, while Karsan gained the most in four months, up nearly 14 percent.

 

Dogus Otomotiv Servis Ticaret AS, which sells Volkswagen AG cars in Turkey, also rose for a fifth day, climbing nearly 3 percent. Â

 

The Turkish government's new financial package, aimed at curbing the impacts of the global financial crisis, came into effect with its publication in the Official Gazette Monday. The $3.2 billion package reduces tax rates in the automotive, white goods and housing sectors for three months to provide impetus to the sluggish economy. This is the fourth financial package prepared by the government since mid-2008.

The package lowers private consumption tax to 18 percent from the current 37 percent on vehicles under 1600cc. It also reduces private consumption tax to 54 percent from 60 percent on cars between 1600cc and 2000cc, and to 80 percent from 84 percent on vehicles over 2000cc. Tax on light commercial vehicles will be calculated at 1 percent instead of 10 percent 

Official data released recently reveals that Turkey's economy has started to feel the severe impacts of the global recession deeper as both domestic and foreign demand shows a drastic decline, prompting a sharp fall in economic activity.

 

The International Monetary Fund (IMF) expects Turkey's once booming economy to shrink 1.5 percent in 2009. The government, who until recently retained an official 4 percent growth target, said the growth target would be revised.Â

 

VAT CUTS
The package also cuts the value added tax (VAT) taken from the sale of new dwellings. The new rate will be 8 percent for three months instead of 18 percent for properties over 150 meters square.

 

In a previous package, approved by the Turkish Parliament last month, the government was empowered to reduce some corporate tax on investments, and also cut taxes on textiles and clothing manufacturers if they move their plants to certain cities.