Alaattin Aktaş from Dünya Newspaper claimed that the effect of VAT, which was reduced to 1% on basic food products, on inflation would not even be 1%. Aktaş stated that the discount may be slightly higher than 3% in terms of food inflation.
President Erdogan announced the VAT regulation, which Turkey has been eagerly waiting for, in a statement on Saturday. President, applied in basic food products 8% VAT reduced to 1% explained. An important article was shared today about the VAT rate reduction on basic food products.
In his article he shared, Dünya newspaper columnist Alaattin Aktaş stated that the effect of the VAT reduction on the consumer price index (CPI) was only 0.71 points. Stating that the inflation in food products is 25.32% this year, Aktaş said that if the prices of other goods and services remain constant in February, thanks to the discount. CPI will decline by only 0.71 points. expressed.
“The effect on foodstuffs will slightly exceed 3%”
“The weight of the food group in CPI this year is at the level of 25.32 percent. However, the VAT reduction does not affect the entire food group. For one thing, VAT on some foodstuffs, especially bread, which has a weight of 2.54 percent, is already 1 percent, so there is no discount for these. VAT on foodstuffs such as soft drinks remains at 8 percent. When these are not taken into account, the weight of foodstuffs benefiting from tax reductions in CPI drops to 21.90 percent.
The weight or price, which was 21.90 in the first half of February, decreased by 6.48 percent (let’s round and say 6.50 percent) to 20.48 for the second half after the tax was cut from 8 percent to 1 percent. In this case, the weight of foodstuffs subject to VAT reduction was 21.19 on the average in February.
The price in March will continue at the level of 20.48, which was formed in the second half of February, and the monthly average will be 20.48. The price of foodstuffs, which is 21.19 in February, is 3.25 percent compared to 21.90 in January; The price, which was 20.48 in March, will decrease by 3.34 percent compared to 21.19 in February.”
When the overall CPI is hit, the VAT discount will not be reflected even as a point:
“The weight (or price) of the products benefiting from the VAT discount is 21.90. In other words, the rest of the CPI has a weight of 78.10. We assume that 78.10 hasn’t changed at all. There is neither a price increase nor a cheapening, this level is constant.
We came to February; The share of food subject to VAT reduction, which was 21.90 in January, decreased to 21.19 in February. With 21.19 we add 78.10, which we assume constant; the value we found is 99.29.
CPI was at 100 level in January. The level dropped in February is 99.29. In other words, the reflection on the February CPI rate from the VAT reduction in food is only 0.71 points. In other words, if there is no price change in any goods and services in February, with the effect of this VAT reduction in food, CPI will decrease by 0.71%”
That’s all! It is good to expect that ‘VAT fell by 7 percent (the decrease is not 7 percent, but 7 points, the two are very different), so that prices will also decrease by 7 percent’, but if this is done, when February rates are announced on Thursday, March 3, disappointment is inevitable“