Big tax hikes in store

Smokers, mobile phone users must pay more to boost state revenues

Taxes on cigarettes and monthly mobile phone subscriptions will rise by up to 317 percent as the government tries to secure state revenues amid the geopolitical uncertainty and high petrol prices threatening to derail its budget policy.

Smokers will have to cough up an extra 0.20 euros per packet starting today. The higher levy will be applicable on all tobacco brands.

The tax rises mean that as of October, monthly mobile phone bills of up to 30 euros per month will be charged an additional 0.50 euros while tax on accounts in the 60- to 90-euro range will rise at least 3.50 euros.

“The implementation of the budget in the first half of 2006 shows that we are moving toward our goals,” the ministry said.

Revenues in the first six months of the year have beaten targets. The government says it has cut the deficit by about a third compared to the same period a year earlier.

Greece is aiming to lower the deficit to below 3 percent of gross domestic product for the first time since the country entered the single currency zone in 2001.

“Intense geopolitical instability has resulted in the increase of petrol prices and raw materials. This influences all countries and forces us to protect the budget from external factors,” the ministry added.

The move comes after an increase at the start of June in the special consumption tax that is applicable to petrol. The tax is expected to boost state coffers an extra 115 million euros over the rest of this year.

According to some estimates, the higher levies imposed yesterday are likely to earn an additional annual amount of 270 million euros.

But the news comes as inflation already appears to be spiking toward the 4 percent mark for July.

Greek inflation remains one of the highest in the eurozone.

PASOK deputy Vasso Papandreou said the tax measures proved that the conservative government’s fiscal policy is not working and criticized state officials for targeting low-income groups.

“The increase will weigh on cheap cigarettes, those that are consumed by people in the lower-income bracket and will harm the Greek tobacco industry,” she said.