September 11, 2018 / 12:12 PM / a month ago

Turkey should apply withholding tax cut to debt instruments - association

ANKARA, Sept 11 (Reuters) - Turkey’s move to lower the level of withholding tax on lira bank deposits should also be applied to investment funds and debt instruments, the head of the Turkish Capital Markets Association (TSPB) said on Tuesday.

Last month, Turkey lowered the level of withholding tax on lira bank deposits of more than one year to zero from 10 percent, while raising the tax level on foreign currency deposits of up to one year.

Under the changes, which will be in effect for three months, the withholding tax on lira deposits of up to one year was cut to 3 percent from 12 percent and the tax on deposits of up to six months was cut to 5 percent from 15 percent.

TSPB Chairman Erhan Topac said in a news conference in Istanbul that withholding tax levels for investment funds and debt instruments needed to be lowered to maintain a balance between investment instruments.

Turkey’s Treasury and Finance Ministry was evaluating the association’s request, he said.

Lowering the withholding levels on deposits would increase their dominance among asset classes, Topac said, adding that this raised concerns about restricting the real sector’s ability to fund through capital markets.

“We are especially worried that the corporate investor base will be negatively influenced and that this will restrict the real sector’s ability to fund through the capital market,” he said.

The TSPB’s members include a total of 225 institutions including 79 brokerage houses, 44 banks, 53 portfolio management firms and 49 investment partnerships.

“Our suggestion is for the same thing to be done at the same rate for investment funds and debt instruments. We want the balance between investment instruments to be maintained,” Topac said. ($1 = 6.4808 liras) (Reporting by Ebru Tuncay; Writing by Tuvan Gumrukcu; Editing by Daren Butler and Ed Osmond)

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