Turkey positions Istanbul as safe haven with new tax incentives plan

Turkey finds opportunity in war: With Turkish officials having looked in recent weeks to position the country as a “safe haven” for capital, a new set of tax incentives could land soon to make that case. “In this [war] environment, as a country that maintains its stability and safe haven status and possesses significant strengths, we believe we have very important opportunities … we are preparing to take advantage of these new opportunities, especially through the Istanbul Financial Center,” Turkish VP Cevdet Yilmaz said last week.

What’s on the table? The Turkish government is looking at an overhaul of its investment and tax regulations, with a comprehensive legislative package to land in parliament soon, President Recep Tayyip Erdogan said on Friday. Under the new proposal, tax benefits would be expanded for companies based in the Istanbul Financial Center, and exporters in the manufacturing sector could see their corporate tax slashed to 9%, from 20% currently. Companies that relocate their headquarters to Turkey will get a set of new tax incentives.

But Turkey has a long way to go to make a serious run against established regional hubs including Dubai or Doha, with the Istanbul Financial Center half-empty three years after its launch. Businesses are wary of their FX exposure amid the volatility of the TRY in the last several years, while the unpredictability of Erdogan’s economic policies compounds uncertainty.

The ‘safe haven’ pitch might already be working

Formula 1 is heading back to Istanbul under a five-year agreement with the Youth and Sports Ministry. “The F1 races… will both support İstanbul’s leading position in the world and demonstrate that our country is the safe haven of its region,” Erdogan said. The return is a “clear reflection of the strong confidence” in Turkey’s ability to deliver — from its infrastructure to its “renowned hospitality,” he said separately.

Why it matters: F1 events usually attract high-spend tourists and act as a shot in the arm for service businesses in the cities that host them. The last Istanbul race reportedly generated some USD 150 mn in revenues back in 2021. And while Turkey has been angling for a return to the F1 calendar since well before the war, the announcement comes on the heels of a string of cancellations that hit three Grand Prix competitions in the GCC as the conflict took hold.

Background: The Turkish Grand Prix will take place in Istanbul Park starting next year through 2031. The motor race was previously held in Turkey between 2005 and 2011 and briefly during 2020 and 2021 under the F1 World Championship.