The offsetting of tax rebates with taxpayers’ dues is particularly important and in most cases essential, as it benefits both sides – i.e. the tax office and the taxpayers – while safeguarding state interests. However, there are cases where offsetting harms economic growth while also creating significant liquidity problems.
Even when there are no overdue tax arrears, the tax authorities by law proceed to offset dues to taxpayers with certified debts that could be paid later in installments.
For example, this year the Single Property Tax (ENFIA) was processed earlier than income tax. In the case that someone is due a tax refund of 3,000 euros and at the same time has confirmed ENFIA dues, they will never receive the tax refund. That way, the law’s option for paying ENFIA in 10 installments is waived, as the tax rebate is offset against the ENFIA. If there is a difference after the repayment of ENFIA, it will be credited to the taxpayer.
An extremely important issue that is creating obstacles to growth concerns companies that have been financed by the National Strategic Reference Framework (ESPA). For example, a company may be funded by ESPA without ever receiving the cash. Say a company had to pay income tax of €40,000 and VAT of €10,000. If the ESPA funding was of the order of 50,000 euros, the entire amount will be withheld by the tax office for the lump sum payment of the tax and the balance for the payment of VAT. Consequently the company misses the chance to pay the tax in eight installments, thereby losing precious liquidity.
According to sources at the Ministry of Finance, a solution must be found through legislation so that valuable financial instruments, such as ESPA, do not end up in the tax office for offsetting future dues.
On Thursday Independent Public Revenue Authority head Giorgos Pitsilis issued a decision that rules out the offsetting of cash returned through third parties (e.g. banks) with any non-overdue arrears of taxpayers if the original debt has been amortized.