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Erdogan's critics say demand for expulsions is distraction from economy woes – Reuters

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  • Erdogan dragging Turkey to precipice, opposition head says
  • Kavala in prison since late 2017 without conviction
  • Turkish lira has lost nearly quarter of value this year
  • Polls show support for Erdogan falling ahead of 2023 elections

ISTANBUL, Oct 24 (Reuters) – President Tayyip Erdogan’s political opponents said his call to expel the ambassadors of 10 Western allies was an attempt to distract attention from Turkey’s economic difficulties, while diplomats hoped the expulsions might yet be averted.

On Saturday Erdogan said he ordered the envoys be declared ‘persona non grata’ for seeking philanthropist Osman Kavala’s release from prison. The foreign ministry has not yet carried out the president’s instruction, which would open the deepest rift with the West in Erdogan’s 19 years in power. read more

The diplomatic crisis coincides with investor worries about the Turkish lira’s fall to a record low after the central bank, under pressure from Erdogan to stimulate the economy, unexpectedly slashed interest rates by 200 points last week. read more

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Kemal Kilicdaroglu, leader of the main opposition CHP, said Erdogan was “rapidly dragging the country to a precipice”.

“The reason for these moves is not to protect national interests but to create artificial reasons for the ruining of the economy,” he said on Twitter.

Kavala, a contributor to numerous civil society groups, has been in prison for four years, charged with financing nationwide protests in 2013 and with involvement in a failed coup in 2016. He denies the charges and has remained in detention while his trial continues. read more

“We’ve seen this film before. Return at once to our real agenda and the fundamental problem of this country, the economic crisis,” said opposition IYI Party deputy leader Yavuz Agiralioglu.

Erdogan said the envoys were impudent and had no right to demand Kavala’s release, stressing that the Turkish judiciary was independent.

Sinan Ulgen, chairman of Istanbul-based think tank Edam and a former Turkish diplomat, said Erdogan’s timing was incongruous as Turkey was seeking to recalibrate its foreign policy away from episodes of tension in recent years.

“I still hope that Ankara will not go through with this,” he wrote on Twitter, describing it as an unprecedented measure among NATO allies. “The foreign policy establishment is working hard to find a more acceptable formula. But time running out.”

Erdogan has not always followed through with threats.

In 2018 Erdogan said Turkey would boycott U.S. electronic goods in a dispute with Washington. Sales of the goods were unaffected. Last year, he called on Turks to boycott French goods over what he said was President Emmanuel Macron’s “anti-Islam” agenda, but did not follow through.

CABINET MEETING

One diplomatic source said a decision on the envoys could be taken at Monday’s cabinet meeting and that de-escalation was possible given concerns about the potential diplomatic fallout. Erdogan has said he will meet U.S. President Joe Biden at next weekend’s G20 summit in Rome. read more

According to the Vienna Convention on Diplomatic Relations, a state may notify a country’s diplomatic mission that a staff member is unwelcome. The country may recall that person or terminate their role.

Erdogan has dominated Turkish politics for two decades but support for his ruling alliance has eroded significantly ahead of elections scheduled for 2023, partly because of sharp rises in the cost of living.

While the International Monetary Fund projects economic growth of 9% this year, inflation is more than double that and the lira has fallen 50% against the dollar since Erdogan’s last election victory in 2018.

Emre Peker, from the London-based consultancy Eurasia Group, said the threatened expulsions at a time when the economy faces “massive challenges, is at best ill-considered, and at worst a foolish gambit to bolster Erdogan’s plummeting popularity”.

“Erdogan has to project power for domestic political reasons,” he said, adding that typically countries whose envoys have been kicked out retaliate with tit-for-tat expulsions. “This stands to make for increasingly difficult relations with Washington and the EU.”

In a joint statement on Oct. 18, the ambassadors of Canada, Denmark, France, Germany, the Netherlands, Norway, Sweden, Finland, New Zealand and the United States called for a just and speedy resolution to Kavala’s case, and for his “urgent release”. They were summoned by the foreign ministry, which called the statement irresponsible.

The European Court of Human Rights called for Kavala’s immediate release two years ago, saying there was no reasonable suspicion that he had committed an offence.

Soner Cagaptay from the Washington Institute for Near East Policy, said the countries involved made up half of Turkey’s top 10 trading partners, underlining the potential setback to Erdogan’s efforts to boost the economy ahead of elections.

“Erdogan believes he can win the next Turkish elections by blaming the West for attacking Turkey — notwithstanding the sorry state of the country’s economy,” he wrote on Twitter.

Writing by Daren Butler
Editing by Dominic Evans and Giles Elgood

Our Standards: The Thomson Reuters Trust Principles.

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Economy

Biden's Hot Economy Stokes Currency Fears for the Rest of World – Bloomberg

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As Joe Biden this week hailed America’s booming economy as the strongest in the world during a reelection campaign tour of battleground-state Pennsylvania, global finance chiefs convening in Washington had a different message: cool it.

The push-back from central bank governors and finance ministers gathering for the International Monetary Fund-World Bank spring meetings highlight how the sting from a surging US economy — manifested through high interest rates and a strong dollar — is ricocheting around the world by forcing other currencies lower and complicating plans to bring down borrowing costs.

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Opinion: Higher capital gains taxes won't work as claimed, but will harm the economy – The Globe and Mail

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Open this photo in gallery:

Canada’s Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland hold the 2024-25 budget, on Parliament Hill in Ottawa, on April 16.Patrick Doyle/Reuters

Alex Whalen and Jake Fuss are analysts at the Fraser Institute.

Amid a federal budget riddled with red ink and tax hikes, the Trudeau government has increased capital gains taxes. The move will be disastrous for Canada’s growth prospects and its already-lagging investment climate, and to make matters worse, research suggests it won’t work as planned.

Currently, individuals and businesses who sell a capital asset in Canada incur capital gains taxes at a 50-per-cent inclusion rate, which means that 50 per cent of the gain in the asset’s value is subject to taxation at the individual or business’s marginal tax rate. The Trudeau government is raising this inclusion rate to 66.6 per cent for all businesses, trusts and individuals with capital gains over $250,000.

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The problems with hiking capital gains taxes are numerous.

First, capital gains are taxed on a “realization” basis, which means the investor does not incur capital gains taxes until the asset is sold. According to empirical evidence, this creates a “lock-in” effect where investors have an incentive to keep their capital invested in a particular asset when they might otherwise sell.

For example, investors may delay selling capital assets because they anticipate a change in government and a reversal back to the previous inclusion rate. This means the Trudeau government is likely overestimating the potential revenue gains from its capital gains tax hike, given that individual investors will adjust the timing of their asset sales in response to the tax hike.

Second, the lock-in effect creates a drag on economic growth as it incentivizes investors to hold off selling their assets when they otherwise might, preventing capital from being deployed to its most productive use and therefore reducing growth.

Budget’s capital gains tax changes divide the small business community

And Canada’s growth prospects and investment climate have both been in decline. Canada currently faces the lowest growth prospects among all OECD countries in terms of GDP per person. Further, between 2014 and 2021, business investment (adjusted for inflation) in Canada declined by $43.7-billion. Hiking taxes on capital will make both pressing issues worse.

Contrary to the government’s framing – that this move only affects the wealthy – lagging business investment and slow growth affect all Canadians through lower incomes and living standards. Capital taxes are among the most economically damaging forms of taxation precisely because they reduce the incentive to innovate and invest. And while taxes on capital gains do raise revenue, the economic costs exceed the amount of tax collected.

Previous governments in Canada understood these facts. In the 2000 federal budget, then-finance minister Paul Martin said a “key factor contributing to the difficulty of raising capital by new startups is the fact that individuals who sell existing investments and reinvest in others must pay tax on any realized capital gains,” an explicit acknowledgment of the lock-in effect and costs of capital gains taxes. Further, that Liberal government reduced the capital gains inclusion rate, acknowledging the importance of a strong investment climate.

At a time when Canada badly needs to improve the incentives to invest, the Trudeau government’s 2024 budget has introduced a damaging tax hike. In delivering the budget, Finance Minister Chrystia Freeland said “Canada, a growing country, needs to make investments in our country and in Canadians right now.” Individuals and businesses across the country likely agree on the importance of investment. Hiking capital gains taxes will achieve the exact opposite effect.

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Economy

Nigeria's Economy, Once Africa's Biggest, Slips to Fourth Place – Bloomberg

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Nigeria’s economy, which ranked as Africa’s largest in 2022, is set to slip to fourth place this year and Egypt, which held the top position in 2023, is projected to fall to second behind South Africa after a series of currency devaluations, International Monetary Fund forecasts show.

The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product at $253 billion based on current prices this year, lagging energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at $373 billion.

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