Turkey ends fuel tax-index system and cuts cigarette VAT

A presidential decree published in the Official Gazette orders the gradual termination of the "eşel mobil" system that linked special consumption tax (ÖTV) on fuel to refinery price changes. The system will be fully dismantled by 1 October, with no automatic ÖTV adjustments based on the domestic producer price index (Yİ‑ÜFE) for the July‑December 2026 period. When refinery prices rise, the ÖTV discount will cover 50 % of the increase up to 31 July and 25 % from 1 August to 30 September; if prices fall, the ÖTV will rise by the same amount.

The decree also reduces the ÖTV rate on cigarettes from 45 % to 42 % and adjusts the specific taxes to 2.2953 TL (minimum) and 23.7404 TL (specific). The automatic semi‑annual Yİ‑ÜFE‑based increase for cigarettes is suspended for the same July‑December 2026 period, aiming to keep price changes balanced while compensating for lost revenue with higher specific taxes. Similar adjustments apply to other tobacco products, while alcohol taxes continue to follow the Yİ‑ÜFE updates. The government expects the measures to ease the budget burden and have no adverse effect on inflation, noting that recent easing of the Israel‑Iran conflict and lower international oil prices support the decision.