The overtaxation of property is suppressing the potential of an economic recovery, which could have been achieved as far back as the first quarter of 2013 had faulty and detrimental property taxes not been imposed, Alpha Bank highlights in its newly released weekly report.
The bank notes that economic irregularities have been caused by two coinciding property taxes in 2014, these being the existing so-called FAP tax imposed on property valued at over 300,000 euros, and the newly introduced ENFIA property tax, currently undergoing revisions before payments begin, most likely in late September.
In its report, Alpha also notes that the nominal property value levels being used by tax authorities to calculate property taxes are well above actual market values, which is playing a major role in restraining the country’s economic activity.
“Economic recovery and greater employment growth are being catalytically obstructed at present by two very significant and crucial taxation errors that are contributing considerably to the further reduction of activity in the real estate market, from levels that are already low,” Alpha stresses in its report.
The bank goes on to state that such policies are further damaging taxpayers’ already dented willingness to cooperate, ultimately depriving the state of significant tax revenue increases.
Alpha estimates that the aforementioned property tax errors deprived the country’s GDP figure of 1.26 percentage points during the first quarter of 2014, as well as a further 0.8 percent in the second quarter.
Despite the concerns expressed in the Alpha report, it does point to some encouraging news on the economic growth front. The bank is forecasting year-on-year GDP growth of between 1.5 and 2 percent in the second half of 2014, following a growth rate of 0.6 percent in the first half of the year.
GDP growth in the second half of 2014 would be supported by factors such as a significant increase in exports of products and services, as well as major gains in the sectors of tourism and shipping, according to the Alpha report.
Meanwhile, in a report of its own, Eurobank highlights that there is no leeway for any fiscal slackening, while adding that the achievement of a primary surplus of 1.5 percent of GDP for 2014 is attainable.
The bank, however, does warn that a series of factors need to be overcome if threats to budget target figures are to be avoided. The threats cited by Eurobank included court decisions obliging salary refunds for certain professional groups, as well as the severe impact on the taxpaying ability of citizens as a result of the deep recession in Greece over the past six years.