The government is expected to ask creditors for an extension of a couple of months to draft a new tax bill, as foreseen in the bailout deal signed with lenders, so that it does not coincide with tax hikes scheduled for next month.
Within October the government has made a committment to implement a new set of tax rates, to abolish most tax exemptions and to raise the taxes paid by farmers, as well as levies on incomes, revenues from property rentals and on deposits, among other measures. These changes are expected to lead to an increase in public revenues by 1 percent of gross domestic product, or 1.8 billion euros.
The Finance Ministry, however, is likely to ask for a change to the timetables from the country’s creditors so that – as ministry officials say – it has time to plan a new simplified tax system that would not provoke additional anger among taxpayers at a time when the overall tax bill will come up to 8 billion euros.
The same officials add that the 1.8-billion-euro increase ought to take place through the redistribution of tax burdens, shifting them to higher income groups – although they have yet to clarify what they consider higher income. This is one of the reasons the ministry is expected to request a postponement of the new tax bill, possibly until November or December.
Of course, this does not mean that the eurozone or the International Monetary Fund will accept to change the timetable, which has also been ratified by Parliament. Sources from the creditors stress that they will not tolerate any changes regarding the taxation of farmers and the solidarity levy that will have to be incorporated into income tax rates.
On the other hand, they appear open to discussing the issue of changing the decision for imposing a value-added tax of 23 percent on private schools’ (pictured) tuition fees, provided that the government comes up with some satisfactory offsetting measures. They also note that the tuition fees may be the only instance where they will accept the introduction of offsetting measures, thereby making it clear that all of the Greek government’s other obligations will have to fulfilled within the agreed framework. This means that by end-October the government will have to have submitted the new tax bill to Parliament.
Any discussions on this issue are expected to begin as of this week, when technical experts from the country’s creditors are scheduled to arrive in Athens to process proposals for income tax legislation.