(Bloomberg) — Turkey will extend a tax exemption on state-backed bank accounts that aim to cut demand for foreign currency by the end of 2023, according to people with knowledge of the matter.
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The Treasury and Finance Ministry sent the regulation on withholding tax — a levy on interest earned on bank deposits — to President Recep Tayyip Erdogan for approval, the people said, asking not to be identified because the decision hasn’t been made public yet.
FX-protected accounts, which guarantee savers’ local-currency holdings against depreciation, are a key tool in the government’s efforts to stabilize the lira and currently hold 2.63 trillion liras ($101 billion). The extension of the tax break, which was due to expire at the end of June, provides an incentive to stay invested.
The government plans to gradually phase out the accounts, which are criticized by the opposition for the financial burden they put on the state budget, if authorities can attract foreign capital by the end of the year, the people said.
A technical team from a Persian Gulf country recently arrived in Turkey to discuss potential investments, they added. The visit follows Treasury and Finance Minister Mehmet Simsek’s trip to the UAE last week, where he met investors and senior government officials, they said.
In another step, the government will increase the withholding tax rate on all foreign-exchange time deposits to 25% from current levels of 18% and 20%, the people say.
Turkey’s Treasury and Finance Ministry declined to comment.
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