Turkish gov't plans to remove withholding tax on local investors

"Under the existing arrangements foreigners do not pay withholding tax on their government bond investments. The tax is zero for them. However, the citizens of Turkey have to pay a 10 percent withholding tax. We are planning to remove this unfair practice," Kemal Unakitan told a group of journalists, Hurriyet daily reported on Monday.Â

 

The Turkish government had removed withholding tax for foreign investors after the market turmoil in May-June 2006, when lira hit all-time low against the dollar and bond yields jumped.

 

The government would do more to enable cash-strapped small and medium-sized business to access credit, and the interest rate subventions to private lenders supporting such business are likely to be unveiled in the coming days, he added.

 

Intervention in the exchange rates, a hasty increase in deposit guarantees, or pleading to the International Monetary Fund (IMF) were non existent in his policy prescriptions.

 

Unakitan also said rich economies would no doubt suffer pneumonia or worse because of the current crisis; however, Turkey was looking at the economic equivalent of a cold.

 

"At a time when the world is rushing its fire brigades to put out a host of fires it's easy to react on a reflex to mobilize your own fire brigades as well," Unakitan said.

 

"But it is also important that you don’t begin pumping water where there is no fire."

 

IMF DEAL

Unakitan also responded to the recent calls from Turkish business leaders for an IMF deal and said the he would do nothing of the kind.ÂA premature renewal of any deal or stand -by agreement with the IMF could do more harm than good since it could tie the hands of the economic administration.

 

The Turkish Business Industrialists’ and Businessmen's Association (TUSIAD) last week warned the government, saying it was time for both the government and the real sector to act together and also urged the government to sign up to a new loan agreement with the International Monetary Fund, made more urgent by the global financial crisis.

 

The business leaders' criticism of the government was irresponsible, he said.

 

"Those in positions of responsibility should temper their remarks and speak appropriately," Unakitan added. "Because we are all in the same boat."

 

A $10 billion standby IMF deal with Ankara expired in May and no follow-up deal has yet been agreed.