ECONOMY

Objective prices seen steady in ’04

The so-called «objective prices» of properties are expected to remain stable in 2004, since the government does not dare raise them just ahead of a general election. The conservative New Democracy party, should it win the election, is expected to keep them frozen as well, as it is likely to face a new election in the first half of 2005, if Parliament fails to elect a new President of the Republic. The objective prices, determined by the State, are the basis for property taxes. They are known to trail actual market prices by 20 to 30 percent, but were adopted as a measure to minimize tax evasion. The government last updated objective property prices in March 2001 and could have done so again as early as March 2003. Finance Ministry officials say that, whichever party wins the elections, it will have to update the objective prices. A law which provides for the simplification of the property tax system, and which would introduce Value Added Tax (VAT) as a replacement for several other taxes, is supposed to be applied from January 1, 2005. A precondition, stated in the law itself, is that objective prices should be brought up to the level of market prices – that is, be effectively abolished. An alternative solution, proposed by ministry officials, would be to raise objective prices now by the level of inflation. However, there is no will among government officials to take any unpopular measures. Right now, it is more likely that property tax reform will be delayed beyond the beginning of 2005.