As of 1 January the rate of VAT on certain food and food services has reduced from 18% to 8%. But will consumers see a price reduction locally?

As of 1 January 2008 the Turkish Government has reduced the rate of VAT on soft drinks, chocolate, coco and food sold in restaurants, cafes, patisseries, fast food outlets and food catering companies. The rate has been reduced from 18% to 8% and follows reductions that took place during 2007 on coffee, herbal tea, frozen products, spices and some other products.

Alcoholic drinks sold in shops and restaurants will continue to be taxed at 18%.

Whilst the big supermarkets have already cut their prices smaller outlets are expected to keep prices as they were and pocket the difference. The Government is aware of this and has called on consumers to boycott such traders and complain to the Finance Ministry. Of course making a complaint is easier said than done. With many local shops appearing to make prices up as they go along and not issuing receipts the consumer will find it difficult to get any hard evidence to back up such a complaint.

As for local cafes, restaurants, fast food outlets and patisseries we think it is unlikely that the VAT reduction will give us all 10% cheaper meals. It’s more likely that prices will rise a little less as traders try to recoup price rises on other costs such as rents, utilities and wages.