Turkey to automatically hike gasoline tax in every six months

Turkey’s ruling Justice and Development Party (AKP) has filed an omnibus bill with parliament that includes an article to automatically hike the special consumption tax (OTV/SCT) on fuel products, local media reports suggested on July 5.

The tax will be hiked in the amount of domestic producer price index (PPI) inflation in every six months.

The government had invented automatic OTV hikes when it introduced the mechanism for the OTV on alcohol and tobacco products.

In H1 2023, the PPI amounted to 15%. As a result, the OTV on one litre of raki has risen to TRY381 from TRY332. 18% VAT is added on this amount. The final price of one litre of raki has risen to TRY769 from TRY649.

The government collects an additional TRY8bn worth of OTV from alcoholic products and TRY20bn from cigarettes.

Currently, the government collects TRY2.5 worth of fixed OTV from gasoline per litre and TRY2.06 from diesel per litre.

When the new amendment comes into effect, the OTV on gasoline will increase to TRY2.9 per litre. When the VAT added, the gasoline price will rise by TRY0.43 and diesel price by TRY0.37.

Auto gas prices will also be affected.

The government expects to collect an additional TRY113bn worth of OTV from fuel products.

Separately, the government increased the VAT rate on fuel products to 20% from 18%. As a result, the price of gasoline rose by TRY0.45 and the price of diesel climbed by TRY0.43.

With the latest tax hikes and the recent lira depreciation, gasoline prices in Turkey have risen by 37% since the beginning of May. Diesel prices are up 41%.

Currently, the gasoline price (unleaded 95 octane) at Opet stations on the European side of Istanbul stands at TRY26.65 per litre and the diesel fuel (Eco Force) price at TRY25.2.

In June 2022, a record high of TRY28.46 was registered for the gasoline price and TRY29.94 for diesel price.

Story chart: Fuel prices in Turkey.

Gasoline prices in Turkey are automatically updated based on a formula. The variables are the Brent oil price, crack margins (CIF Med), the USD/TRY rate and the taxes (the special consumption tax (OTV/SCT) and the VAT).

According to data from the Petroleum Industry Foundation of Turkey (PETDER), gasoline sales in Turkey were up 31% y/y to 3.9mn cubic metres (3mn tonnes) in 2021 while diesel sales were up 11% y/y to 31mn cubic metres (11mn tonnes) and autogas sales were up 7% y/y to 3.1mn cubic metres.

In 2022, gasoline sales were up 11% y/y to 4.3mn cubic metres while diesel sales were flat at 31mn cubic metres and autogas sales were up 7% y/y to 3.2mn cubic metres.