ECONOMY

‘Piggy bank’ plan for pensions

piggy-bank-plan-for-pensions

The ministers comprising the Government Council for Social Policy will on Wednesday be seeking ways to recapitalize the country’s social security funds via future revenues from the funds’ assets – estimated at 15 billion euros – various fines from combating tax dodging and contributions evasion, and even a possible tax on stock transactions.

The Labor Ministry aims to include in a draft law prepared for early 2016 a number of clauses regarding the creation of a special reserve fund – effectively a social security fund – that will make the pension system sustainable in the long term.

Combined with the government’s central political objective – increasing social security contributions for two or three years – the idea is to create a fund that would not burden the state budget. The ministry intends to link the funds’ revenues to the level of social security contributions, meaning that the more revenues grow the smaller contributions will become.

This Greek fund could operate along the lines of the Norwegian fund, and collect revenues from various sources, such as the utilization of the state’s real estate and other assets via the privatizations fund, revenues from hydrocarbons, games of chance and so on.

The fund will operate as a “piggy bank,” intended to support the social security system in the future when required, and could also seek revenues from a possible tax on stock transactions or even the imposition of a special levy on concession contracts for public works and on state suppliers when there is the appropriate margin for that, which would benefit the pension system. Other possible revenues could come from tax fines or other types of financial penalty, for example for traffic violations.

A major challenge for the government remains the containment of illegal labor, estimated nowadays at around 20-25 percent. Even the representatives of the country’s creditors have suggested to government officials increasing of the pension funds’ revenues through the combating of undeclared labor as an offsetting measure against a social security contribution increase.