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€ 7 billion from new taxes in 2011

04 October 2010 / 11:10:14  GRReporter
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The government expects another € 7 billion to get into the state treasury in 2011. According to the draft budget the government expects the raised revenues to reach € 55 billion. The Memorandum of financial support Greece has signed with the eurozone countries and the IMF includes the main sources of these revenues.

New increase in tax value of real estate, luxury tax, tax on vehicles, change of VAT on certain goods and services await the Greeks the next year. The socialist government of George Papandreou plans to increase not only the common taxes but the tax on soft drinks and embarks tax on profitable businesses for the third year, which will probably reach even 10% of the profits.

The government hopes to raise at least € 600 million from profitable companies. A measure the government will apply to avoid the extra tax burden on individuals with medium and low incomes. Another € 2 billion are expected to be raised from the new increase in fuel taxes and VAT. It is not explicitly confirmed but the Ministry of Finance seriously considers increasing the average VAT value from 11% (so far) to 12% or even 13% on most goods and services from this group, not excluding the possibility some products to be transferred to the high VAT value of 23%. An exception will be made only for essential foodstuffs and the public utilities payments (electricity, water, etc.). The Greeks will not get away with another increase the next year, namely the alignment of excise duty on heating fuel with the excise duty on transport fuel. The PASOK government provides partial subsidies to households that will be determined by the location of the dwelling, its area in square meters and the annual household income. Analysts in Greece comment that the final decision for the VAT and excise duties increase is deliberately retained because of its unpopular nature and the danger it hides for the upcoming local elections in early November this year.

Another € 1.5 billion are expected to enter the public pocket in 2011 from the tax amnesty, which would absolve the numerous taxpayers that have transgressed in the period 2000-2009 year of their sins. Tax unfairness remains a problem in Greek society, so the Minister of Finance George Papaconstantinou introduced a new type of taxation based not only on the year revenue, but on the property owned by the tax payer. The focus is upon over 500,000 freelancers that the last year declared incomes close to or at the level of the minimum taxable annual income, but hold movable and immovable property of value exceeding several times the financial scopes they have declared.

The ultimate goal of the government is to meet the Memorandum of financial support obligations so as to obtain the low-interest loan from the IMF, the ECB and the EC. The government expects that the budget deficit at the end of 2010 would be 8.1% of GDP and it must be only 7% of GDP at the end of 2011. If the problems with revenue raising continues the next year the government will resort to further cuts in spending. In addition to taxes increase and cuts in expenses for 2011 the government also plans the privatization of some of the state enterprises (the state rail company, part of the electric company, ports, etc.) which should bring at least € 1 billion.

Tags: EconomyMarketsBudget
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