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The Turkish finance ministry has introduced an exemption to withholding tax for foreign buyers of Turkish lira-denominated domestic government bonds​, according to a November 20 announcement posted in the Official Gazette.
The move, already in effect, allows foreign buyers to use an omnibus account—enabling managed trades for more than one person, each of whom can remain anonymous—with the Central Securities Depository of Turkey (MKK), Reuters reported.
The term ‘Foreigner with a moustache’ is used by Turkish capital markets players in reference to a Turk who trades via foreign brokerage houses. It became popular in 1988 when the then government introduced a tax on Istanbul stock exchange profits for everyone except foreign investors.
Since then, the tax rules have been amended many times over, but in Turkey, those lucky enough to have the option, typically find it advisable to retain the status of a foreigner, particularly if they can claim Western origins. Detained, but eventually released, US Pastor Andrew Brunson and Turko-German journalist Deniz Yucel are two of the more notable cases that spring to mind.
It is impossible to identify how many “foreign” investors, who currently hold around 65% of the Borsa Istanbul market, are actually Turkish citizens, but, according to a column by Abdurrahman Yildirim published by Haberturk in 2015, “once upon a time even an SPK [Capital Markets Board of Turkey] head said about one-third of foreign investors [on the Istanbul stock exchange] were locals”.
Keeping the show on the road​. Right through the Erdogan administration are officials who, charged with keeping the show on the road whatever terrible consequence of economic mismanagement rears its ugly head next, appear to spend most of their time in a workshop devoted to coming up with original short-cuts or Potemkin village schemes to hide Turkey’s gruesome structural economic problems. Perhaps it helps that almost all of them used some kind of ‘alternative route’ to land their gainful employment in the first place.
The latest tax exemption for foreign buyers of domestic government bonds via omnibus accounts will go some way to solving the image problem of having low foreign interest in the market. The foreign share of the market in question has nosedived to stand just above 10% since an ‘Erdoganomic’ scheme saw the systematic scrapping of it from November 2018 with the objective of curbing interest rates.
With the moustaches and the government’s foreign collaborators given an anonymous way in, expect a quick rise in the foreign share of the domestic government bonds market. Meanwhile, if there are enough fools desperately looking for opportunities to throw excess good cash after bad thanks to the
80​ TURKEY Country Report​ December 2019 ​ ​www.intellinews.com