Transfer Expenditures Measures Taken Against COVID-19 Pandemic in Turkey

Financial packages implemented during the pandemic can be classified into two cate­gories: budgetary and extra-budgetary measures. Budgetary financial packages are: health spending, tax reductions and deferrals, transfers to households and firms, wage and unemployment subsidies.

As of 10 March when the first COVID-19 case was seen in Turkey, administrative measures were started to be taken in the areas of health, education, transport, trade and accommodation. Administrative measures were subsequently followed by economic measures. The biggest step regarding economic measures is the Economic Stability Shield Package (Ekonomik Istikrar Kalkani Paketi 2020).

The arrangements in the Economic Stability Shield Package announced on 18 March 2020 are briefly as follows:

• April, May and June payments of withholding and VAT withholding tax and SGK premiums in various sectors are postponed for 6 months.

• Application of accommodation tax is postponed.

• April, May and June payments of easement fees and revenue shares related to hotel rentals are postponed for 6 months.

• As for domestic airline transport, VAT which is 18% is decreased to 1% for 3 months.

• Loan and interest payments of companies whose cash flow has deteriorated are postponed and additional financing support is provided when necessary.

• Stock financing support for exporters.

• Loan principal and interest payments of tradesmen and craftsmen is postponed for 3 months without applying any interest.

• The limit of credit guarantee fund is increased and the SMEs are given high priority.

• Housing loan interest rates are cut.

• Loan support packages.

• The lowest pension is increased to 1500 TL and pension promotion payments are brought forward.

• 2 billion TL cash aid support is allocated to those who are already entitled to needs support.

• Providing minimum wage support and short-time working allowance.

The Economic Stability Shield Package includes public expenditures, tax reduc­tions and financial supports. In the context of transfer expenditures, social support programs, raising the lowest pension, bringing forward salary promotion payments paid to retirees during religious holidays, and cash aids for families in need can be examples of social transfers (Table 6.4).

Measures taken for employment in Turkey are: short-time working allowance, unpaid leave practice and layoff bans. The conditions of the short-time working allowance which is applied in times when the business is slowed down and stopped due to a force majeure have been stretched during this period (Kara 2020). Lay-off bans, which started on 16 March, have been extended until 30 June 2021, until going back to normal. Short-time working allowances and unemployment allowances can also be considered as social transfers.

Table 6.4 Supports provided under social protection shield (as of 18.05.2020)

Source Aile, Cal∣sma ve Sosyal Hizmetler Bakanltjtt (2020)

It is also reported that an additional 2 billion lira-resource has been allocated for cash aid to families in need within the scope of the Economic Stability Shield Package. It has been announced that a cash support of 1000 TL will be provided to 2 million households that meet the neediness conditions in the relevant laws in cooperation with the Ministry of Family, Labour and Social Security.

On the other hand, economic transfers were offered through financing supports, expanding loan opportunities and lowering interest rates, postponing loan payments, tax reductions and deferrals, stock financing supports and loan guarantee fund. In this context, in the aviation sector, which is one of the sectors most affected by the crisis, the VAT rate on domestic flights were lowered, the accommodation tax, the servitude and revenue shares of the hotels were deferred, and the VAT declaration periods and SSI premiums were postponed in various other sectors (Table 6.5).

In addition, in order to support the supply and demand side of the economy, loan support packages with below market interest rates were made available under the leadership of public banks for financing support. These loans for individual basic needs, SMEs, tourism, housing, vehicles and retail sectors were in high demand. Housing sales increased by 209% compared to the same month of the previous year, especially with the housing loan campaign.

These supports provided to stimulate the demand in the market and to ensure the continuity of financing increased the duty losses of public banks. Duty losses are included in the current transfers item in the budget. According to the data of the Presidency of Strategy and Budget, the duty loss of Halk Bank, which is a state bank, increased by 59% and the duty loss of Ziraat Bank, also a state bank, increased by 40% in January-May compared to same period of the previous year.

Table 6.5 Loan facilities provided during COVID-19

Source Created by author benefiting from Bankasi (2020) and IZTO (2020)

6.6