The government aims to assist the central bank in achieving a 16% inflation target by the end of 2026, down from over 31% last month.
Significant tax hikes on essential goods and services, such as fuel, are being prepared for 2026 as the final step in the government's efforts to help the central bank curb inflation. Turkey plans to increase taxes on fuel and other regulated prices to levels consistent with the central bank's inflation target for the coming year, according to individuals familiar with the matter who requested anonymity as the discussions regarding these changes are private.
The semi-annual tax adjustments, typically announced within the first week of the year, will show that taxes on gasoline and diesel are rising at a more moderate pace than laws and regulations suggest. This move underscores the government's commitment to helping the central bank reach its 16% inflation target by the end of 2026, down from over 31% last month. Fuel prices are closely monitored by markets due to their broad impact on consumer inflation.
Excise taxes on gasoline and diesel usually increase twice a year, with the growth rate aligning with the cumulative inflationary pressure of producer prices during the previous six months. The increase at the start of 2025 was also slightly lower than what the formula indicated, as authorities sought to limit price pressures.
Government objectives
Measures for the new year will also target so-called "administered prices," which include all goods and services determined or directly influenced by the government and regulatory bodies. Tobacco, alcoholic beverages, and energy fall into this category. Finance Minister Mehmet Simsek stated last month that increases in certain taxes and fees would be based on targeted inflation instead of the 25.5% revaluation rate, which aligns with producer price inflation. The rise in consumer prices is expected to end the year at around 30%, six percentage points above the central bank's target. Analysts predict that inflation will slow to approximately 25% within 12 months, according to forecasts gathered by Bloomberg.
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