ECONOMY

VAT rates could be slashed next year

The government hasn?t ruled out a reduction in value-added tax rates next year, according to a statement by Alternate Finance Minister Pantelis Economou on Skai Television on Wednesday.

He added that his target is to avoid increasing VAT from 13 to 23 percent for food items, stressing that this would not be a productive move. ?Still, I have to find measures that would have the same financial impact,? he admitted.

Economou suggested that a committee has already started examining VAT rates, stating his desire to have just two brackets, with rates of 10 and 20 percent. Today there are three brackets, these being 6.5, 13 and 23 percent.

The ministry wants to change VAT rates this fall via its new bill, and Economou said there are also thoughts of introducing social criteria as far as road tax is concerned, adding that they wouldn?t apply until the end of 2012.

Other ideas the ministry is considering ahead of drafting the new bill are the reduction of corporate tax to 15 percent, while abolishing tax exemptions for companies and for a number of categories of taxpayers. The aim is for the burden of tax exemptions on the budget to fall from 8 to 4 billion euros.

Meanwhile the ministry issued on Wednesday its official figures regarding the budget?s execution in the first half of the year, confirming preliminary data that the gap has grown to 4.5 billion euros from 3.2 billion in the year to May. For the budget to be executed in full, the government will need to secure tax revenues of 33.7 billion euros by the end of the year to reduce the deficit to the required level of 7.5 percent of gross domestic product.

The budget gap is attributed to the huge amounts absorbed by the social security funds, which reach almost 100 percent of their annual grants, while ministries are extremely reluctant to pay their dues and the Public Investment Program is all but out of action.