The Greek government is developing a plan for radical changes in the tax legislation. In practice, it proposes the creation of a new tax environment for businesses and households with VAT rate reduction, first in restaurants, the gradual increase of non-taxable minimum, the introduction of a unified real estate tax, eliminating tax fines and penalties and also removal of a number of tax incentives and preferential regimes.
The government will discuss the plan with the supervisory Troika, whose technical team is in constant touch with officials in the Ministry of Finance.
According to sources, the development of the new tax bill, after several months delay, is one of the main priorities of the government.
The Ministry of Finance is setting up a working group, which will examine the proposals submitted within the social dialogue, which started in September 2011 and ended in March 2012.
The finance team plans to create a framework, which will include the basic principles of the tax bill. Subsequently it will be presented and discussed with the Troika, and if it gets the "green light", it will be discussed with the social partners and then taken to parliament.
A particularly discussed topic on the negotiating table with the Troika will be the immediate reduction of VAT in restaurant businesses from 23 percent to 13 percent. One such regulation would lead to an immediate reduction in the price of all products (ready meals, soft drinks, juices, etc.) that are available in restaurants and it will help the "heavy industry” of the country - tourism. The next steps will be a gradual reduction of the high VAT rate from 23 percent to 19 percent, of the average rate from 13 percent to 9 percent and of the lowest rate from 6.5 percent to 5 percent (for the total tourism package). Furthermore, the three parties, which formed a coalition in the government, have agreed to reduce VAT on agricultural commodities - seeds, fertilizers, pesticides, feed, etc.
According to sources, the Troika representatives set as a prerequisite the abolition of several tax breaks and preferential regimes, the complete restructuring of the mechanisms for tax collection and tax control, in order to approve the requested reductions in the VAT rates and income tax.
Regarding the non-taxable minimum in the programme contract, signed by the three parties, which support the government, it is provided for its gradual increase to the average European values, especially for workers and employees. In order to achieve this, during the negotiations with the Troika the economic team will try to push the increase in non-taxable minimum from 5,000 to 8,000 Euros. The Troika, however, expresses serious objections. The possibility of increasing the tax-free minimum in time (i.e. by 2015), is being addressed. However, if the creditors of Greece approve the measure, it will be included in the bill that will accompany the decisions on the tax reform and will be active from 1 January 2013.
Payment of 9 contributions with equivalent measures
The economic team of the government is seeking to find equivalent measures so that the Troika can approve the introduction of a special regulation for the payment of additional tax burden of up to 9 installments. Generally the Troika favours the request of the Greek government for the payment of taxes by installments, in order to help households. However, its representatives express their dissent and criticism in connection with the losses recorded in earnings in this year's budget. According to sources, from the 5.1 billion Euros scheduled to be collected this year from income tax, a solidarity tax contribution and trading near 1.52 billion Euros will be transferred for 2013, if the Troika accepts the regulation requested by the government. This "hole", i.e. the revenue, which will be lost in 2012 and transferred to next year, should be filled by equivalent measures to achieve the budgeted goals.