While inflation approached 50 percent in January and rose to a new peak in 20 years, Value Added Tax (VAT) reductions on foodstuffs were announced recently to reduce inflation.
Evaluating the 7-point reduction in VAT to our newspaper, Inflation Research Group (ENAG) Manager Prof. Dr. Veysel Ulusoy stated that the effect of the discount would be weak against high inflation and said, "It is insufficient to reduce the inflation fever against excessively high prices."
After the VAT reduction in food, which was published in the Official Gazette, it was translated into high inflation rates.
Emphasizing that the operability of tax policies against high inflation has decreased, Ulusoy underlined that the tax reduction against the exorbitant price increases experienced with the pandemic is as much as a hike, "The effect of the VAT reduction against high prices remains a form of price reduction for only a few days," he added.
DISCOUNT DOESN'T CHANGE THE DIRECTION OF INFLATION
Reminding that taxes are included in prices against high inflation rates, Ulusoy said, "The VAT reduction will be ineffective against both high prices and the taxes included in the prices, and it creates a temporary promotional effect in a situation where prices are very volatile and does not change the general course of inflation."
MINOR REGULATIONS CANNOT PREVENT INFLATION FEVER
Ulusoy, who underlined the need to make an adjustment in prices and to clear the VAT from prices before the discount, “Since the general level of prices is already at an incredible stage, it is impossible for small adjustments to prevent the inflation fever. That's why the discount made has an effect like a shot of gunpowder against high inflation,” he added.