Turkey is set to implement a tax on credit cards aimed at bolstering its defense industries and enhancing its deterrent capabilities, as announced by Finance Minister Mehmet Simsek on October 2024. Emphasizing the need for increased security, Simsek stated, “Our country has no choice but to fortify its deterrent capacity. Currently, our region is engulfed in fire and conflict. We are living in a perilous environment.”
This announcement, however, has not been well-received among consumers who express concerns about the new tax. Simsek further clarified in an interview with private television channel NTV that “these resources will be entirely devoted to the defense sector; this is not an initiative aimed at reducing the budget deficit.”
In the first eight months of 2024, the Turkish defense industry reported export revenues amounting to USD 3.7 billion, reflecting a 9.8% increase compared to the same period in 2023. Haluk Gorgun, head of the Turkish defense industries, noted that the defense sector, which includes prominent products such as Bayraktar drones, constitutes nearly 80% of the nation’s export earnings. The draft legislation proposed by the ruling Justice and Development Party (AKP) outlines a tax of 750 Turkish lira (approximately EUR 20) on credit cards that have a credit limit exceeding TRY 100,000 (about EUR 2,700), irrespective of the amount utilized.
The implications of this proposal have prompted many customers to approach their banks to lower their credit limits, potentially pushing Parliament to reevaluate the legislation. The defense industry in Turkey has undergone substantial growth over the past twenty years, with Minister Simsek highlighting that, in the early 2000s, the nation relied on imported materials for 80% of its defense needs. Today, he contends, Turkey manufactures over 80% of what it requires, a transformation driven by approximately 3,500 companies within the sector.
The Turkish defense industry, which operates under direct oversight of the President, is considering the development of an “iron dome” missile defense system akin to Israel’s, as outlined by Simsek, who is also a board member in the defense sector. “We have almost a thousand such projects, all employing cutting-edge technology that will enhance our future export capabilities. This, however, necessitates additional resources,” he asserted. According to Simsek, funding for the defense industry has surged from 90 billion Turkish lira in 2023 to 165 billion lira in 2024, with the possibility that this amount could be doubled again.
Opposition leaders, however, argue that these military initiatives merely serve to obfuscate Turkey’s ongoing economic challenges. Deniz Yucel, the spokesperson for the main opposition party, the Republican People’s Party (CHP), criticized the AKP for manipulating national sentiments surrounding homeland defense to justify what he describes as a potential proposal for economic exploitation. Yucel further accused the ruling party of fabricating a narrative of external threats, such as the assertion from President Recep Tayyip Erdogan that “Israel could pose an attack.” He remarked, “They are attempting to conceal the economic crisis they’ve engineered. The populace is currently suffering, as if we are under a war economy.” Turkey continues to grapple with inflation, which, despite a reduction to around 50% over the past year, soared above 85% in October 2022.
