Erdogan is trying to use the war in Iran to turn Turkey into a crossroads of energy and trade chains. However, experts are skeptical. Why?
The war in Iran has caused economic uncertainty around the world. Many countries are worried about rising inflation and shortages of raw materials. But while the Persian Gulf countries are losing their image as "safe havens", Turkey is taking advantage of the situation. With large tax breaks and other economic incentives, Ankara is trying to attract large foreign investors and capital.
20-year tax exemption and other measures
At the end of April, President Erdogan introduced a package of measures that was also discussed in parliament. The goal is to make his country more attractive to foreign capital and qualified labor.
The law is aimed at individuals and companies that have not paid taxes in Turkey in the last three years. If they choose to register their capital, gold or securities in Turkey by July 14, 2027, they will receive a 20-year tax exemption on income earned abroad. They will also owe only one percent in inheritance and donation taxes. For comparison: for the other groups, the inheritance rate is between 1 and 10%, and for donations - between 10 and 30 percent.
Other reliefs are also provided - property in the country that has not been declared to the tax authorities so far can be declared without imposing sanctions if it is invested for a certain period in government bonds or similar instruments.
Foreign trade, which recorded a decline of 6.4% in March 2026, will also be stimulated. To this end, the government intends to reduce the corporate tax for local enterprises. For exporters who produce, the tax rate will be reduced from 25 to 9 percent, for others - to 14 percent.
Turkey wants to become a global financial hub
The government wants to turn Istanbul into a financial hub similar to Singapore and Hong Kong. Companies registered in the city will be completely exempt from taxes on profits from international transit trade. Global corporations that move their regional administrative headquarters there will also be tax-free for a period of 20 years.
The authorities also want to reduce bureaucracy to make the country more attractive for investment. It is planned to create a centralized digital platform that will unify and speed up all processes - from company formation to work and residence permits to environmental inspections.
Erdogan announced that Turkey will no longer be a bridge between East and West or North and South. Instead, the country should become a crossroads for energy and trade chains in the region. Amid the crises of recent years, the country has become an "island of stability" in "a changing multipolar world".
"To keep the ship from sinking"
However, experts are skeptical. "This is just an attempt to find fresh money. There is no more money and resources to be used", says economist and real estate expert Emre Sirin. According to him, the government is trying to use all the levers to attract capital. Tax breaks for foreign companies and individuals are desperate measures. "To keep the ship from sinking", sums up Sirin. According to him, there is almost no foreign direct investment in the country, while local companies are either going bankrupt or moving out. Another criticism is the lack of control over the origin of funds, which often leads to cash flows generated by criminal activity.
The "Justice and Development Party" government has already presented such relief seven times. In 2008, such a program was implemented for the first time, and according to government data, assets worth 31 billion US dollars were declared at that time. In this way, the capital of Turkish citizens abroad was returned to the country and the market was strengthened, says Finance Minister Mehmet Simsek.
Serious problems in the economy and the rule of law
The war between Iran, the US and Israel has indeed led to uncertainty in the Persian Gulf region. But it is unlikely that Turkey's attempts to present itself as an alternative will be truly successful, observers warn. The country must make progress in guaranteeing the rule of law and media freedom, economist Sinan Alcin emphasizes to DW.
Turkey has been in a severe economic crisis for years. Erdogan's policy of keeping interest rates low plunged the country into crisis in 2019, and since then it has been experiencing double-digit inflation. Last month, inflation was 32.4 percent, and in May 2024, it even exceeded 75 percent at times. Independent economists also express doubts about the official data of the Turkish Statistical Institute. Over the weekend, the Turkish president replaced its head with a decree. The independence of the Turkish central bank has also been the subject of debate for years.