Turkey plans to raise taxes slightly in 2026 to try to reduce fuel prices to fight inflation

The Zhitong Finance App learned that the Turkish government is planning to implement a small tax increase on key goods and services (including vehicle fuel) in 2026. This is the latest step taken by the government to help the central bank contain inflation. According to media reports, people familiar with the matter, who did not wish to be named, revealed that Turkish government officials are expected to limit the increase in fuel-related taxes and regulated prices to a level consistent with the monetary authorities' inflation target next year, with the aim of helping the central bank achieve the 16% inflation target by the end of next year.

Turkey's Ministry of Finance and Finance did not immediately respond to requests for comment.

People familiar with the matter said that the semi-annual tax measures, which are usually officially announced within the first week of each year, will show that the increase in gasoline and diesel taxes will be lower than indicated by laws and regulations, which means that the growth rate will be more moderate. The move highlights the commitment of the Turkish government led by Erdogan to help the central bank of Turkey achieve its fixed annual target of drastically reducing inflation from over 31% last month to 16% by the end of 2026.

Due to its widespread impact on increasingly high consumer inflation in Turkey, fuel costs are closely watched by the foreign exchange market.

The special consumption tax on gasoline and diesel is usually raised twice a year, and the increase matches the producer price inflation accumulated during the previous six months.

The increase at the beginning of 2025 was also slightly lower than the level implied by this calculation formula, as the Turkish authorities tried to contain price pressure.

The new year's measures will also target so-called “regulated prices,” that is, all goods and services directly set or influenced by governments and regulators. Tobacco, alcoholic beverages, and energy all fall into this category.

Turkey's Finance and Finance Minister Mehmet Simsek said last month that part of the tax increase would be based on target inflation rather than the 25.5% revaluation rate as data — the latter is an indicator that is in line with producer price inflation.

According to Turkish economists' expectations, the country's consumer price increase is expected to reach about 30% at the end of the year, which is six percentage points higher than the central bank's year-end target (the central bank of Turkey has set an inflation target of 24% for the end of 2025). According to forecasts compiled by the agency, analysts expect the indicator to slow to slightly above 25% after 12 months.

It is worth noting that as of December 2025, the Bank of Turkey was not in the “process of raising interest rates,” but had already cut interest rates/easing: for example, on December 11, 2025, the central bank lowered the interest rate on the one-week repurchase policy from 39.5% to 38%, and clearly placed it in the context of a “declining inflation process (disinflation)”.

The reason why Turkey's inflation is still high (for example, about 31.1% year on year in November 2025) is mainly due to the combination of import and energy/food cost transmission due to the sharp depreciation of the lira in the past few years, inflation expectations and stickiness in pricing behavior (including indexing/promotion mechanisms for wages and prices), and administrative price factors such as tax/regulated price adjustments; the deeper “sequelae” stem from the previous period, which still drove interest rate cuts and credit expansion in a high-inflation environment, triggering an exchange rate and inflation spiral (2022 inflation once exceeded 85% and was accompanied by a currency crisis) “Dust Typical results from “Erdoganomics”.