Turkey seeks to spur long-term saving with tax tweak
ISTANBUL Nov 22 (Reuters) - Turkey may tweak its tax system to encourage more long-term saving and reduce its dependence on foreign borrowing to finance investment, Finance Minister Mehmet Simsek said on Thursday.
Simsek said work had been completed on proposals to introduce a lower withholding tax on long-term deposits and a higher tax rate on short-term deposits in an effort to boost the rate at which Turks save.
Turkey's strong economic growth has long been overshadowed by its gaping current account deficit, expected to narrow to 7.3 percent of output this year from 10 percent last year, partly due to the country's low savings rate.
Simsek said the proposed measures would be considered by the cabinet but did not give a timeframe. Turkey applies a 15 percent withholding tax on interest gained on bank deposits.
Total banking sector deposits stand at around 750 billion lira ($416 billion) and the average maturity is three months.
Savings fell to 12 percent of national output in 2010 from around 17 percent in 2002-2008, according to World Bank data. That compares with around 23 percent in the 1990s.
The current account deficit jumped to $77 billion, 10 percent of the country's gross domestic product in 2011. It stood at $626 million in 2002. ($1=1.8023 Turkish lira) (Reporting by Ebru Tuncay; Writing by Seltem Iyigun; Editing by Susan Fenton)