Parliament’s State Budget Office has issued a warning to the government that citizens cannot afford to pay any more taxes, and that increasing taxation will undoubtedly lead to a rise in tax evasion.
In its quarterly report, Parliament’s fiscal experts also warn that the economy could enter an even deeper recession, although they do concede that it was better to sign the third bailout agreement than extend the uncertainty, or even allow for a disorderly default. Still, the talks on changes to the measures in the bailout program and the attitude of the opposition are again feeding economic uncertainty.
“The taxpaying capacity of reliable citizens has been exhausted, and the increases in tax rates and any new taxes could strengthen tax evasion,” Parliament’s economists estimate. “Therefore the constant tax increases, especially during a credit crunch, cannot be effective. They are strengthening the recession and canceling many investment projects,” they add, pointing to the major increase seen already in expired debts to the state. “International experience shows that the successful application of reforms is much more difficult in an recessionary environment,” they say.
The report stresses that the economy’s progress recorded over 2014 and the first half of 2015 has been reversed, adding that “there is a risk the country will slide into a deeper recession or toward long-term stagnation.” However, it does estimate that this risk could be averted under certain conditions so that Greece could return to growth in 2017.