New budget adds to the tax burden

Hidden raises will hurt wage earners

The draft 2004 budget, submitted to Parliament yesterday, will impose an additional tax burden on wage earners and pensioners even though officially, no new taxes will be levied.

But the budget provides for additional revenue of 1 billion euros from direct taxes. Most of that will come from not index-linking income tax brackets to inflation. In plain terms, this means that, with the extra income they earn this year, many taxpayers will find themselves in a higher tax bracket. Non-indexation will compensate for a decline in the top income tax rate and the raising of the tax-free income ceiling.

Total additional revenues for 2004 are set at 2.6 billion euros, a rise of 7 percent. This year, with all its efforts to force companies to settle past debts, the government will strain to achieve a 6.3 percent rise. Spending, on the other hand, will increase by 6.9 percent.

The ministry allocated the greatest sum is the Labor Ministry, which will spend a total of 5.589 billion euros next year. The extra spending will go on raises in minimum pensions to farmers, an increase in the so-called “social solidarity bonus” given to the poorest families, a 10 percent rise in unemployment benefits, extra incentives to bring women into the workplace and the State’s contribution to the social security system.

Other ministries with a significant increase in outlay are those of Public Order — which will undertake the burden of providing security for the Athens Olympics — Agriculture and Health. The much-advertised defense-for-education spending swap will not take place, since Defense Ministry expenditure rose 7 percent, while the bulk of the 8 percent increase in money earmarked for education will pay for raises in personnel salaries.

Economy and Finance Minister Nikos Christodoulakis yesterday submitted the draft budget to Yiannis Thomopoulos, the Socialist MP who is president of Parliament’s Finance Committee. The committee will debate the budget in three sessions and submit its comments to the minister. Christodoulakis must submit the final budget to Parliament no later than November 20. The full-house debate over the budget will take up five sessions and a vote will be taken on the final day before Christmas and New Year’s recess.

Opposition leader Costas Karamanlis yesterday called for an extraordinary debate among party leaders over the state of the economy. The government itself has scheduled a debate on the economy and the European Union for October 22.