Turkey abruptly withdraws crypto tax plan... "Concerns over capital flight"

Turkey’s parliament has abruptly scrapped plans to levy taxes on cryptocurrency transactions. The move follows mounting concerns that, amid strong opposition from the opposition bloc and the industry, the measure could trigger significant side effects such as capital outflows.

According to Turkish outlet Hürriyet on the 28th (local time), the Grand National Assembly of Turkey agreed to delete all provisions related to crypto taxation from a recently deliberated omnibus bill. The provisions centered on imposing a 0.3% transaction tax on all trades conducted through crypto-asset service providers and withholding 10% of investment gains at source on a quarterly basis.

The decision was reached in a last-minute cross-party agreement as criticism over the plan’s impracticality intensified. In particular, a proposal to apply the transaction tax even to transfers to personal wallets drew fierce backlash, with critics saying it was "no different from demanding a tax when withdrawing cash from a bank." Experts noted that such a taxation approach is an unusual case globally, implemented only in a handful of countries such as Kenya.

Fears of capital flight also played a role. Ussal Sabaz, managing partner at MnP Istanbul Hub, warned: "If excessive taxes are imposed on crypto assets, where transfer costs are close to zero, users will immediately move funds to offshore exchanges," adding, "South Korea and India are also trying to revise similar design flaws after experiencing capital outflows." The assessment is that a poorly designed tax regime would result not in higher revenue but in a loss of the tax base.

Turkey’s parliament plans to resubmit a revised tax proposal through a separate legislative process. With crypto trading volumes in Turkey surging amid the lira’s collapse and high inflation, the government still views the market as a key source of tax revenue.