Turkey to Soften Inflation Accounting Rule to Shield Investments

The Turkish government plans to ease inflation accounting rules by exempting capital expenditures from calculations, according to officials familiar with the matter. 

Current inflation accounting rules have weighed on companies’ financial results, prompting higher tax payments in some cases. The current rules in place could discourage corporate investments in the government’s view, the officials said, asking not to be named because they are not authorized to speak on the matter. The amendments could be submitted to parliament in the coming days, they said. 

The Turkish Treasury and Finance Ministry declined to comment. 

Turkey switched to inflation accounting this year after three-year cumulative domestic producer price growth exceeded 100%. Firms with annual gross revenues below 50 million liras ($1.46 million) were recently exempted from inflation accounting. 

Turkish Firms to Get Reality Check With Inflation Accounting

Vice President Cevdet Yilmaz had told Bloomberg last month that the government would assess the impact of inflation accounting on investments and discuss how it would continue to be applied for 2025. Businesses have criticized the system in place and called for a review of it. Sekib Avdagic, the head of Istanbul Chamber of Commerce, said the rules jeopardize investment and force small and medium-sized companies to pay tax over their investments.