Cabinet grits teeth, approves tax measures

Concern about scheme’s unpopularity

Five members of the Inner Cabinet (from left to right) Education Minister Evripidis Stylianidis, Defense Minister Vangelis Meimarakis, Development Minister Christos Folias, Public Works Minister Giorgos Souflias and Interior Minister Prokopis Pavlopoulos exit from yesterday’s meeting where a set of new tax measures were given the green light.

The Inner Cabinet gave its grudging consent yesterday to measures that will see self-employed professionals, a group considered to be mostly supportive of New Democracy, taxed more heavily.

In measures unveiled by Economy and Finance Minister Giorgos Alogoskoufis, any self-employed people who earn up to 10,500 euros, which was tax free until now, will have to pay 10 percent of their income in taxes.

There were concerns during yesterday's cabinet meeting, chaired by Prime Minister Costas Karamanlis, that this could have damaging consequences for the government's popularity but most ministers, aware of current budget difficulties, gave their approval.

A government source said that on the plus side, the new tax measures were not impacting on salaried employees or pensioners.

«There are 1,500,000 salaried employees and pensioners and they contribute about 75 percent in revenues whereas the self-employed number more than one million but only contribute 25 percent,» he said.

Some ministers also expressed concern that Alogoskoufis would also be announcing the government's intention to give pensioners and salaried workers some tax breaks from 2010. They suggested that such a positive move would be buried beneath the bad news of the tax rise for the self-employed.

Alogoskoufis insisted that the announcement was necessary to stave off the government's critics.

PASOK, however, launched a fierce attack on the government and Alogoskoufis, claiming the new measures were proof that New Democracy's economic policy has been derailed.

The party's spokesperson on economic affairs, Louka Katseli, said the measures were «a desperate effort to fill the holes in the budget and escape the looming obstacle of coming under the European Union's supervision [for having an excessive public deficit].»

Katseli added that the measures, which also include a 20 percent increase in road tax for cars and motorbikes, were harsh on self-employed professionals as well as the owners of small businesses.

Katseli said that regardless of yesterday's announcements, Karamanlis would still have to explain in his speech at the Thessaloniki International Fair next week how «his budget collapsed.»