The main obstacles to an accord

Value-added tax, corporate taxation, privatizations and defense spending are among the main sticking points in the negotiations between Athens and its creditors that are set to culminate on Saturday in Brussels at the extraordinary Eurogroup meeting.

While in most areas there has been some satisfactory convergence in the positions of the Greek government and the country’s lenders, there are a number of disagreements that the two sides will try to iron out this weekend.

The main one concerns VAT: The creditors are asking for net revenues of 1.8 billion euros per year while Athens says it can offer 1.67 billion. The government also proposes that all food remains at the 13 percent rate while the creditors want basic foodstuffs only to stay in this bracket with the rest taking the high rate of 23 percent. The creditors want to do away with the 30 percent discount on VAT for Aegean islands, but the government insists on holding on to it. Notably, Greece is not asking for a VAT reduction clause in the case that revenues from combating tax evasion increase, as the creditors have proposed for the end of 2016.

On corporate tax, Athens wants to impose an extraordinary levy of 12 percent on companies that earned over 500,000 euros last year, but the creditors reject this, saying it will harm growth, and are instead proposing that companies pay 100 percent of their income tax in advance, as is standard practice in most European countries.

The creditors also want the abolition of the tax exemptions that farmers and shipping companies enjoy and of the heating oil allowance, but Athens rejects both.

Athens says nothing in its proposals about completing the privatization of the regional airports on the existing terms, and has not included the privatization of Independent Power Transmission Operator (ADMIE) and the transfer of the state’s stake in OTE telecom to sell-off fund TAIPED in its sell-off plans.

On defense spending, Greece has decided to cut expenditure by 200 million euros next year, while its creditors are asking for cuts of 400 million.