Turkey is planning to increase taxes on banks and corporations as the government looks to offset some of the burden of a ballooning budget deficit aggravated by election pledges and devastating earthquakes.

A bill submitted by President Recep Tayyip Erdogan’s ruling AK Party and seen by Bloomberg proposes an increase in the corporate tax rate to 25% from 20%. The levy for banks, insurers, brokerages, pension firms and electronic payment companies would be raised to 30% from 25%, according to the draft.

Turkish stocks extended their declines following the news, with the Borsa Istanbul Banks Index slipping as much as 3.6% and later paring the drop to 1%. The benchmark Borsa Istanbul 100 Index fell as much as 1.9% before reversing losses.

Parliament is expected to take up the bill for discussion this week. The ruling party can change the text at any time before a vote is held.

Erdogan ramped up fiscal spending ahead of elections in May, boosting wages and offering early retirement to millions of people. The vote came months after a pair of deadly earthquakes in February, which inflicted an economic toll estimated at over $100 billion by the Treasury and Finance Ministry.

The bill would also allow the government to triple its net borrowing limit for this year. Previously, the government could increase the limit by 5% twice a year.

Worries that new measures on taxes could be introduced could give newly arriving foreign investors pause, according to Serdar Pazi, research group director at Global Securities in Istanbul.

The government foresees the budget deficit for this year at 659 billion liras ($25.3 billion), according to the Treasury. The shortfall in the first five months reached 264 billion liras.

Other key articles from the bill include:

• Turkey’s central bank will assume the costs of a flagship lira savings tool aimed at shielding depositors against exchange-rate fluctuations, known by its Turkish initials KKM. Currently, the Treasury and the central bank split the burden stemming from lira depreciation as they compensate savers for exchange-rate losses
• Owners of motor vehicles to pay a one-time additional tax that’s equal to the levy they have to pay in 2023
• Erdogan will be authorized to increase the special consumption tax by up to five times on various goods. Previously, the president could increase it by 50%

Burcu Aydin Ozudogru, a director at the Ankara-based TEPAV think-tank, said that before the latest proposal she estimated the budget deficit at over 10% of gross domestic product for this year, given the massive toll of the earthquakes.

“Today’s measures — including taking the KKM burden from the budget — will likely cut it but the deficit will still remain high,” she said. “With this current policy set, it looks like inflation, the lira’s depreciation and rising poverty will be at the top of our agendas in the coming period.”

--With assistance from Beril Akman, Tugce Ozsoy and Asli Kandemir.

(Updates with analyst comments starting in seventh paragraph. A previous version of this story corrected the tax rate in the first deck headline.)