ECONOMY

IMF proposes shift in taxation

The reduction in social security contributions and the increase in special consumption taxes, value added tax and property levies form the core of the proposal that the technical team of the International Monetary Fund has recommended to the government.

The technocrats also proposed moving a number of goods from the 6.4 percent VAT bracket to the 13-percent one, the abolition of the VAT reduction on remote islands and a single 19 or 21 percent VAT rate on all-inclusive hotel and tourism packages at a later stage.

The proposed taxation shift is expected to lead to additional burdens on consumption, private incomes and small and medium-sized enterprises, while the IMF staff reject proposals for a reduction in the top VAT rate (23 percent) and of income tax.

For the latter, the technical experts propose fewer income brackets, by reducing them from eight today to just three or four. That is set to mean more taxes for citizens and companies unless it comes with a simultaneous reduction in tax rates.