The Turkish government defended its proposal for a tax on credit cards on Tuesday, asserting that the measure is essential for funding the arms industry and ensuring national security amid ongoing regional conflicts.

In response, many Turks, already grappling with double-digit inflation, have urged their banks to reduce their credit limits following the submission of the tax bill by the ruling AKP party to parliament last Friday.

This legislation emerges against the backdrop of escalating tensions, including Israel's confrontations with Iran-backed militant groups in Gaza and Lebanon, alongside missile strikes from Iran, which have heightened global fears of a wider conflict in the Middle East.

Finance Minister Mehmet Simsek emphasized the necessity of enhancing the country's deterrent capabilities, stating, "Our country has no choice but to increase its deterrent power. There’s war in our region right now. We are in a troubled neighbourhood," during an interview with private broadcaster NTV.

The proposed bill indicates that individuals with credit card limits of at least 100,000 liras (approximately $3,000) will be required to pay an annual tax of 750 lira ($22) starting in January, aimed at strengthening the defense sector.

“The purpose (of the bill) is obvious,” Simsek argued.

“If we increase our deterrent power, then our ability to protect against fire in the region will increase,” he said, though he added that the bill was in the hands of parliament and the ruling party could “re-evaluate” it.

The Chairman of the AKP parliamentary group, Abdullah Guler, stated during his proposal of the tax on Friday that Israel’s subsequent target would be Turkey, a claim frequently made by President Recep Tayyip Erdogan.

“While we are in the middle of all these hot developments geographically, we need to make our defence industry stronger than ever,” Guler said.

Weapons industry

A vocal opponent of Israel's actions in Gaza and Lebanon, Erdogan has cautioned that Israel's military campaigns may soon extend to Turkey, leading the opposition to call for an urgent parliamentary session for the government to provide clarification.

While Turkey's defense industry has experienced significant growth in recent years, Simsek emphasized the necessity for further enhancement in the sector.

He noted that the defense industry is set to invest in 1,000 projects, which includes the development of an air defense system designed to shield Turkey from missile attacks.

“This requires resources,” he added.

Turkey allocated 90 billion lira from its budget to fund the defense industry in the previous year.

“This year, we increased it to 165 billion lira. Maybe we will need to double this even more.”

In the year 2023, Turkish defense companies achieved a significant milestone by securing contracts totaling $10.2 billion, as reported by Haluk Gorgun, the esteemed head of Turkey's state Defence Industry Agency (SSB).

It is noteworthy that the top ten Turkish defense exporters played a pivotal role in this success, contributing an impressive 80 percent of the overall export revenue.

Among the notable achievements, sales of Turkish Baykar drones, which gained prominence in conflicts such as Nagorno-Karabakh and Ukraine, amounted to a substantial $1.8 billion.

‘Disguise the economic crisis’

Last week, a closed-door session of parliament was convened for the government to articulate its perspective on Israel as a potential threat; however, the opposition expressed skepticism regarding these claims.

Deniz Yucel, the spokesperson for Turkey’s main opposition CHP party, stated on Monday that the government was leveraging national sentiments to divert attention from an ongoing "economic crisis."

Over the past two years, inflation has surged dramatically, reaching an annual high of 85.5 percent in October 2022 and 75.45 percent in May 2023.

Recent official statistics indicate a decrease, with inflation slowing to 49.4 percent in September.

“The AKP is trying to create a fake ‘foreign threat and war agenda’ with the rhetoric of ‘Israel may attack us’,” Yucel said on Monday.

“We know and see that they are trying to disguise the economic crisis they caused.”