Turkey Strikes Back at Cryptocurrencies: A Transaction Tax is Evaluated

The Turkish government is notoriously unfriendly to cryptocurrencies. Those who wanted further proof of this had it in the form of the recent idea of introducing a so-called transaction tax: a 0.03% tax on cryptotrading-related transactions. The move is part of a more profound tax overhaul wanted by the Ministry of the Economy and justified, at least on paper, by the budget deficit that has hit the country since the tremendous earthquake at the beginning of 2023.

New Transaction Tax, Old Approach to Cryptocurrencies

The move harks back to the Turkish government's usual approach to decentralised finance, which has always been frowned upon by the executive, and proposes a new tax in the regulation of financial transitions. Bloomberg experts have already analysed the new tax as soon as the Turkish government made it known and concluded that such a measure could be something of a boon for Turkish coffers. According to analysts at the well-known financial aggregator:

"The Turkish Finance Ministry is considering introducing a 0.03% transaction tax on cryptocurrency trading, which has become popular among Turkish retail investors seeking a hedge against the lira's weakness and rampant inflation. According to official projections, the decision would bring in 3.7 billion lira each year."

A Major Tax Reform

The Turkish government has revealed a tax reform of impressive dimensions. This is expected to generate as much as 226 billion Turkish lira - about $7 billion - which corresponds to 0.7% of the national GDP. Mehmet Simsek, Minister of Treasury and Finance of Recep Tayyip Erdogan, has drafted a draft of the law and parliamentary approval is expected by the end of June.

Within the package, the transaction tax aims to take advantage of the growing popularity of cryptocurrency trading, which is spreading like wildfire in the country. Investors want to hedge against inflation and currency depreciation. When authorised (it is more a question of when than if), the reform will mark the biggest tax change in Turkey in the last two decades.

It is thoughtful to include cryptocurrencies within the values to be taxed, since, as we elaborated a few days ago here on SpazioCrypto, we are in a phase where tokens are acquiring growing popularity worldwide.

The Transaction Tax Signals a Reversal of Route

It is easy to predict that the Erdogan government will approve the reform, since this is the will of the sultan and, as we know, his administration is democratic only in appearance giventhe power he has seized in the geological era in which he has been head of state. Beware, however, of taking it all too much for granted because, despite his power, the president has often encountered setbacks in his governing work. Especially when it came to regulating and legislating taxes on financial transactions.

In the past, Erdogan and his people had always denied that they would retaliate against gains from cryptocurrencies and their related stocks. The executive's aversion to the sector, however, is well known and no member of the Turkish government staff hasever denied the possibility of the imposition of very limited taxes on this type of transaction. The transaction tax therefore marks the definitive crossing of that hypothetical threshold. The motivation for this choice was given by Minister Simsek himself, who said:

"Turkey aims to leave no area untaxed in order to provide justice and effectiveness in taxation."