Turkey’s pumped up on petrol tax

Generally we’ve found Turkey great value for money. Most things are between 50-60% of their cost in New Zealand and they’re often of a similar quality.

Transport is the exception. Buses between and within cities seem to be approaching New Zealand prices. The prices seem especially high because in Iran they were exceptionally low. You might reasonably expect to pay $1USD per hour of bus transport in Iran. In Turkey we pay about five times that.

Petrol prices
Source: World Bank

The price of petrol here is a big driver of costs. Per the World Bank’s most recent data, Iran is among the ten cheapest countries in the world to buy petrol. A litre will set you back about $0.33USD. Turkey on the other hand is the single most expensive with a litre here a whopping $2.54USD. For reference, in New Zealand you’ll pay a middling $1.77USD.

Exchange rates mean prices bop around a bit, and I gather Turkey may have been surpassed by Norway, the Netherlands and Italy. Factor in that the average Turk earns much less than the average Norwegian, though, and it still gets some kind of prize.

PAYE at the pump

Oil is bought and sold on a global market. Delivery costs have some minor impacts on  variation between countries but mostly it is about government policy. Some countries offer subsidies. Venezuela, for example, subsidises fuel down to a ludicrous $0.02USD/litre. Many others, including Turkey, tax petrol. When you buy a litre of fuel in Turkey about 60% of what you pay goes to the government.

These petrol taxes are not to try and reduce consumption, nor to provide dedicated funding to improve Turkey’s roads. The reason for the petrol taxes is simply that they are easy to collect, hard to evade and hard to avoid. People buy petrol under almost all eventualities, and their consumption isn’t very sensitive to price. Plus, as most of Turkey’s petrol is imported, checking tax is paid on importation is relatively easy, certainly easier than checking up on individuals’ income.

Turkey has income tax too but levels of compliance are abyssal. Something like 45% of Turkey’s national wealth is produced through the informal economy. That’s around four times higher than the EU average. Until tax compliance improves, it is unlikely that Turkey will significantly decrease its petrol taxes.

This situation isn’t great for us. As tourists we are effectively paying tax for travel that we might not if more Turks made good on their income tax obligations. That said, in a move that has probably bolstered an already booming airline industry, jet fuel is exempt from government taxes. That must be part of the explanation for why flying here is so comparatively cheap. We’re paying as little as $25USD for a one hour flight. That’s less than by bus.

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