ECONOMY

Budget revenues, expenditures way off targets, ministers find

The implementation of the 2004 budget is fraught with serious difficulties as revenues and spending are both getting out of control. Economy and Finance Minister Giorgos Alogoskoufis and his deputy ministers yesterday discussed ways to implement the budget as well as progress in the new government’s inquiry into the state of public finances, where it hopes it will reveal the «tricks» used by its predecessor to present deficits and the debt in a more favorable light than their true state. Deputy Finance Minister Petros Doukas appeared especially concerned over a report by the General Accounting Office which shows expenditures running well beyond the target set for the 2004 budget. The ministers agreed to try to keep spending under strict supervision and assess spending by state bodies according to whether a particular job was completed or not. Excess spending, however, is just one concern. Recent data show that, in March, revenues increased by just 2 percent, compared to the same month last year, far below the budget’s target of 6.3 percent. This is at least partly a problem of the new government’s doing, as it pledged to abolish the financial crimes squad (SDOE), calling it a hornet’s nest of Socialist sympathizers bent on harassing businesses under the pretext of tax inspections. After early indications that businesses interpreted the conservatives’ victory in the March 7 election as a license to conceal their transactions, the government has backtracked, insisting on renewed inspections and saying that it would «reform» SDOE and change its name. At yesterday’s meeting, it was agreed to speed up changes in order to bring in more revenues. Tax offices have already started mailing letters to people who owe money to the State in order to recoup funds. The number of individuals who owe money to the State and whose payment deadlines have passed is estimated at 583,530 and the amounts owed at 5.3 billion euros. It seems that the 2004 budget, like the previous ones, will depend on chasing down tax evaders – individuals as well as corporations – to attain the revenue target. A plan to get revenue from idle state property has yet to be developed but is expected to materialize this year. The government will also seek to accelerate inflows from the Third Community Support Framework (CSFIII) mainly financed by the EU. At the end of 2003, only 7.1 billion euros out of the 31.6 billion made available by the EU had been absorbed. Taxes and investment The government will submit two important laws, one on taxation and another on investment incentives, in September. Alogoskoufis has already pledged lower taxes in the taxation law. As for the investment incentives law, it will be an updated and improved version of the one voted on by the previous Socialist government in January. Alogoskoufis wants the new investment law to target economic sectors that will affect employment. However, the new government must find a formula to provide selective investment incentives that will not fall afoul of the European Commission. The existing law provides incentives for large investors, with over 30 million euros to invest in a single project. The Commission has said this discriminates against small and medium-sized enterprises. Thus, the government’s attempt at targeting incentives to construction and tourist enterprises may also be considered discriminatory.