AKP faces backlash over proposed “defence fee” on credit cards

Türkiye’s ruling Justice and Development Party (AKP) has introduced a controversial bill to the parliament that would require high-limit credit card holders to pay an annual fee to bolster the country’s defense industry fund.

Under the draft legislation, credit card holders with limits of 100,000 Turkish lira ($2900) or more would be required to pay an annual fee of 750 lira ($21) into the Defense Industry Support Fund.

The proposal also outlines additional fees for various transactions:

• Real estate sales: 750 lira from both buyer and seller
• First-time vehicle registrations: 3,000 lira
• Second-hand vehicle transfers: 1,500 lira
• Other notary services: 75 lira per transaction

The bill is expected to be in effect in January 2025 if voted by the parliament.

A surge in requests to avoid the fee

The proposal ignited a debate about its legality and efficacy with some critics labeling it as a “thinly veiled new tax.”

AKP Parliamentary Group Chair Abdullah Güler defended the proposal, stating, “This bill aims to create additional resources for investments in the defense industry.”

Güler projected that the new measures would generate an additional 70-80 billion lira ($2 billion-$2.3 billion) annually for the defense industry fund, which is used to finance and develop the sector. The fund reported revenues of 135 billion lira in the previous year, according to the Turkish Court of Accounts.

The announcement has prompted an immediate response from credit card holders, with banks reporting a surge in requests to lower card limits below the 100,000 lira threshold.

In an attempt to stem this tide, some financial institutions have begun issuing warnings to customers seeking limit reductions.

One major bank’s online platform now displays a message cautioning users: “The reported contribution fee collection has not yet been legislated. There is no need to lower your card limit at this time. We will inform you if there are any legal changes.”

Economic experts criticize

The proposal has drawn sharp criticism from economic experts.

Mahfi Eğilmez, a prominent economist, took to social media to express his concerns: “Credit card limits or used credit cannot be taxed. Credit is debt. Taxes are levied on the creditor, not the debtor. As we distance ourselves from scientific principles, we’re descending into a terrible confusion of concepts.”

Fatih Özatay, another respected economist, suggested alternative approaches: “Instead of these measures, the focus should be on taxing high-income earners, reducing public-private partnership revenue guarantees, and implementing a ‘source of wealth’ law.”

The opposition has been quick to capitalize on the controversy.

Özgür Karabat, the General Accountant of the main opposition Republican People’s Party (CHP), said the bill introduces a “new tax with no parallel in the world”

“They said there wouldn’t be new taxes, yet they’ve concocted a tax with no parallel in the world. They’re not admitting that they’re imposing additional taxes due to insufficient budget revenues; instead, they’re calling it a ‘credit card limit participation fee’,” Karabat said.