ECONOMY

Government tries to appeal to a wide range of voters with tax cuts, incentives

The package of measures unveiled by Prime Minister Costas Simitis and Economy and Finance Minister Nikos Christodoulakis will cost a total of 2.36 billion euros, including 865 million to be spent on pay rises for civil service workers and pensioners. The measures, which, according to the government, are not merely handouts to the poorest but also aim at promoting economic development, are divided into seven main areas: measures in favor of farmers and countryside development; low-income boosting; employment; families; public sector; corporate taxes and vehicle duties. Some of these measures will be implemented on October 15, 2003 and the rest at the start of the new year. The government has decided to raise the minimum monthly pension for farmers to 200 euros from the current 170, beginning on January 1, 2004. From October 15 this year, the special tax on diesel fuel paid by farmers will be reduced from 245 euros per ton to 21 euros per ton, to the level of heating fuel. According to present rules, farmers were entitled to a refund on the tax ranging from 50 to 80 percent but the administration handling the tax was, as usual, deficient, leading to delays, mistakes and complaints. The special compensation given to farmers in mountainous and disadvantaged areas will rise by 10 percent. Property transfer tax on agricultural land is to be abolished, provided that the transferred property, whether inherited or sold, will still continue to be used for farming. Incentives will be provided to farmers’ cooperatives to encourage investment. The government will ask permission from the EU to lower VAT on farm equipment and machinery to 8 percent from the current 18 percent «imposed by a New Democracy government,» the Economy Ministry said in a statement. Small shops in villages of fewer than 1,000 inhabitants whose annual profits do not exceed 10,000 euros become tax exempt. Parish churches are also tax-exempt. There will be bonuses for civil servants serving in mountainous areas or remote islands; this includes hospital doctors. The requirements for setting up a company in the countryside will be simplified. The Investor Reception Centers, now working on a pilot basis, will be expanded to all prefectures. Regional Entrepreneurship and Development Centers will be set up to advise and support private firms. A special task force will help with exports. Some 25,000 people will be hired as part-time employees in the civil service and local authorities. Incentives will be provided to enterprises to hire the unemployed. Civil servants’ pay will rise by up to 6.5 percent from January 1, 2004. In an effort to increase productivity, up to 35 percent of the profits of companies will not be taxed for three years if they are used for development; tax controls will be simplified and fines abolished. Taxes after audits will be paid in 36 installments. Outstanding taxes will be paid in 48 installments, with the interest on them being reduced. The tax on diesel for small and medium-sized businesses and industries will be slashed to 120 euros from 125 euros from Oct. 15, 2003. Productions costs will be cut by 2-5 percent, which will help their products competitiveness. Effective immediately, taxes on cars and motorcycles will be cut from the present range of 7-88 percent to 5-50 percent, depending on their engine capacity. Motorcycles with engines smaller than 125cc will not be taxed. The EU will be asked to allow VAT on motorcyclists’ helmets to be reduced from 18 percent to 8 percent.