A regulation for the collection of a certain amount of money per branch from banks will be initiated. State Minister Ali Babacan held a press meeting on Thursday. He insistently responded to questions as to how the extension of SSI premium support and the adjustment benefit provided for the retired will be financed as there is no allocation determined in the budget with this new tax. Radikal daily gave the news with the heading "Poll tax is introduced for banks." This was exactly what happened. So, was this a move in the right direction? Does this poll tax have any meaning? No, it does not. It only means witnessing the prevailing fiscal policy disaster. Period. Let us think on this issue and see what the new tax looks like.

Please do not directly conclude "banks were enjoying their lives when we were in pain; not let them feel a little pain." Banks are already in trouble up to their neck. Secondly, this tax, in terms of its design, directly targets banks that extend credits; and this is not fair. Third, it has no link at all with the framework in mind of US President Obama. It only implies that there are a number of "fund searchers" seeking to patch the torn budget. Innovative attempts in fiscal policy augur ill. This implies that Tarzan in real trouble. The old days of fund searching have returned. We are once again surrounded by "Fund Quests" as was in the term of Refahyol government. This tax looks exactly like the fruits of an absurd project. It gives the impression that things will be done again in the way they were done in the period before 2001. This is what the qualifications of this tax project imply.

What is the essence of this new tax-to-be? It aims, in a populist fashion, that those "who were enjoying their lives while others were in pain" contributes to the recovery. Yes, all banks were enjoying their lives; but some were enjoying more than others. Why? First, thanks to interest rates rapidly falling in under the supervision of the Central Bank, banks recorded profits in 2009.  Which banks earned the highest profits? Those banks who did not extend credits and almost solely traded government debt securities possibly at a single office earned the highest profits. Banks who solely dealt with Treasury operations enjoyed the biggest profits. So, does this new arrangement stipulate that those banks will pay the highest amount of taxes? No, highest amount of taxes will be paid by the banks with the highest number of branches. Thus, it means that this tax does not aim to collect highest amounts from those banks which enjoyed their lives the most. The target audience of this tax is wrong. This is the first point.

And the second one: This tax puts a heavier burden on the shoulders of banks which extended higher volume of credits and supported the private sector at the largest extent. Why? A bank with a lot or branches is a bank that extents high amount of credits. For instance İş Bankası, which had 1039 branches by 2008, extended 47.6 million TL of credits in total and rank the second among all banks in terms both the number of branches and the volume of credits extended. Why is this so? The reason is quite simple: a bank with a lot of local branches can collect the richest knowledge about local firms with lowest costs. Therefore, a bank with local branches is a bank that holds the capacity to extend credits to locally operating SMEs. In this sense, banks that have the capacity to extend credits to SMEs are punished while no burden is put on the shoulders of those to trade GDSs at a single branch. So, what do you say?

It is true that banks recoded profits over the previous period by engaging in GDS trade. But we should also note that these were the banks which restructured non-performing loans several times upon the authority granted by Bank Regulation and Supervision Agency and thus helped non-performing loans not to be registered as such. History will argue that the burden of this period was shouldered by banks. Despite a government determined not to take any action, banks backed firms in rainy days. They protected the credits in their balance sheets as well as their customers. Do you think that credit restructuring is carried out free of charge? Is not it recorded under costs? So what is the conclusion? Banks that extended credits and protected the borrowers in rainy days are now forced to bear higher costs thanks to the new arrangement. Such a regulation is not only wrong but also unfair.

The last point is related with the meaning of this arrangement. If such an unjust fiscal policy measure is the only options we have, it appears that the source of funds is about to dry.

It is not surprising that the name of the IMF has been fading out off the agenda.

This commentary was published in Referans daily on 16.01.2010