November 27, 2017 / 2:35 PM / a year ago

Turkish retail group calls for rent tax cut to offset weak lira

ISTANBUL, Nov 27 (Reuters) - The head of a Turkish association of hundreds of retail firms called on the government on Monday to halve value added tax on store rents to help retailers hit by the lira’s recent fall to record lows.

United Brands Association (BMD) Chairman Sinan Oncel said retailers’ growth and their operating profit to net sales ratio had been hit by the lira’s weakness, and several large retailers had scaled back expansion plans this year.

Most raw material and rents in Turkey are charged in foreign currency. Although most shopping malls had fixed their rents, some retailers have reached the point where they would have to shut down stores if no measures are taken, Oncel said.

“The weakening lira is hurting the retail sector. Our costs became unpredictable. Especially raw material, production costs and rent. These make the business highly unpredictable,” he said, adding that some stores had been forced to close.

Speaking at a meeting in Istanbul Oncel called for value added tax on store rents to be cut to 8 percent from 18 percent and an option to pay in Turkish lira should be included into rental agreements.

At 1347 GMT, the lira stood at 3.9050 to the dollar and 4.6801 against the euro, after hitting a record low of 3.9800 and 4.7171 respectively last week over worries about relations with Washington and pressure from President Tayyip Erdogan on the central bank.

Several companies which planned to open up 40-50 new stores each this year realised less than half of that growth due to the sudden move in the exchange rates, BMD Vice Chairman Ismail Kutlu said.

The retail umbrella organisation BMD has 412 members which own 70,000 stores in total and employ 400,000 people.

Rental cost per square metre increased 7.7 percent while revenue by square metre was up only 4.4 percent in the three years from 2014 to 2016 according to an analysis of the sector shown at the meeting.

Turkish retail sector Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) growth is expected to be less than 5 percent in 2017 while it was 14 percent two years ago, Oncel said. (Reporting by Ceyda Caglayan; Writing by Ezgi Erkoyun; Editing by Dominic Evans)

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