Turkey may exclude financial institutions from its planned switch to hyperinflation accounting, Treasury and Finance Minister Mehmet Simsek said, a move that could support the state’s tax income. “We will switch to inflation accounting, maybe we will exempt financial entities and leave them out of this,” Simsek told a parliamentary budget and planning commission in Ankara late on Tuesday.
He didn’t give further details on the scope of the exemption, but the broad definition could affect banks, brokerages, and factoring companies, preserving a valuable source of tax revenue for the government.
“Hyperinflation is obscuring banks’ financial forecasting and valuation visibility, which may not suit foreign investors, who want to see more commitment to orthodoxy,” said Tomasz Noetzel, a senior emerging European banking analyst for Bloomberg Intelligence.
Lenders’ total net income rose 54% in the first nine months of 2023 to 440 billion liras ($15.5 billion) from a year ago, according to regulator data. Earlier this year, the government raised the corporate tax on banks, insurers, and capital market institutions including brokerages to 30% from 25%. Hyperinflation accounting involves adjusting companies’ financial statements to reflect the impact of extreme price changes on purchasing power and profitability.
Annual inflation in Turkey was 61.5% as of September, falling from a peak of 85.5% in October 2022.
