BUSINESS

Gov’t proposes bank transaction levy

Rate would amount to 0.1-0.2 pct to fetch 300-600 mln euros per year; creditors shoot down VAT plan By Prokopis Hatzinikolaou & Dimitra Manifava

Athens is promoting the idea of a special levy on banking transactions at a rate of 0.1-0.2 percent, while the government’s proposal for a two-tier value-added tax – depending on whether the payment is in cash or by card – has met with strong opposition from the country’s creditors.

A senior government official told Kathimerini that among the proposals discussed with the eurozone and the International Monetary Fund is the imposition of a levy on bank transactions, whose exact rate will depend on the exemptions that would apply. The aim is to collect 300-600 million euros on a yearly basis.

Available data show that the annual level of bank transactions comes to over 660 billion euros but the government will likely exempt debit card transactions, such as cash machine withdrawals, given that the Finance Ministry is eager to promote the use of debit cards as part of its efforts to combat tax evasion. The precise terms of the levy have not yet been addressed but the idea is being discussed in principle, as it is seen to have considerable fiscal benefits and a low impact on ordinary household budgets.

As for the proposal for shaving three percentage points from the VAT rate when a transaction is not made in cash, Greece’s creditors are opposed to the scheme, arguing that it would bring annual losses of 6.5 billion euros for state coffers. Instead, they propose the main rate to be set at 18-20 percent and the low one (applying to food, drugs and books) to stand at 8 percent. At the same time, they want the discounted rate that applies on Aegean islands to be scrapped.

Athens proposed a top VAT rate of 18 percent, dropping to 15 percent for cash-free transactions, and a 9.5 percent rate for food, drugs and books, falling to 6.5 percent for card transactions.

Following the rejection of this idea from the country’s lenders, the Finance Ministry sent a new proposal that includes three VAT rates. According to sources, these are 7.5 percent, 15 and 21 or 22. It is estimated that this scheme would bring in an additional 800 million euros in revenues. However, 200 million euros of this would be returned to the Aegean islands to compensate for the increase in their VAT rates.

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