Property transfer tax to drop to 3 pct

The new property tax bill will include the reduction of the transaction tax to 3 percent from 2014, following strong pressure from the country’s creditors. The Finance Ministry however intends not to make any announcements on the issue so as to avert the postponement of the few transactions that may take place by the end of the year.

Today the tax stands at 8 percent for the first 20,000 euros of the property’s value and grows to 10 percent for amounts above that level. From next year, however, all property transactions will be taxed at a 3 percent rate from the first euro.

The representatives of the European Commission, European Central Bank and the International Monetary Fund – known as the troika – have insisted that the model of property taxation in Greece be changed by shifting the burden from transfers toward ownership.

According to data compiled by the Panhellenic Federation of Property Owners, Greece has the second-highest transfer tax (10 percent) in the European Union, behind Belgium’s (12.5 percent), while the European average stands at just 4 percent.

The bill concerning the new system for taxing property is expected to be submitted to the two parties that comprise the coalition government on Monday, when the parliamentary parties reconvene, to examine whether the changes they had asked for are reflected in the Finance Ministry’s final draft.

This latest draft provides for a reduction in the expected revenues from 2.9 billion euros to 2.65 billion, with the 250-million-euro “hole” to be covered by the Public Investments Program again. It is not yet known whether the country’s creditors will accept the reduction of the Public Investments Program as an appropriate counterbalancing measure, or if they will ask for offsetting interventions from other sources. If the troika does agree to it, the Public Investments Program will be reduced to 6.75 billion euros for next year.

Still, no government has managed to meet the targets of the Public Investments Program. For instance, this year the original target had been for 6.85 billion euros, with the latest estimates putting the actual amount to be spent by the end of the year at 6.65 billion.

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