Gray areas in the government’s measures to ease load on Greeks

Gray areas in the government’s measures to ease load on Greeks

Several of Prime Minister Alexis Tsipras’s economic pledges made last weekend at the Thessaloniki International Fair (TIF) remain unclear while others contravene existing legislation.

Notably, the government has decided to make a profound change to its policy on corporate taxation: The legislation it had approved saw the corporate tax rate being reduced next year from 29 percent to 26 percent, but at TIF Tsipras announced that it would be gradually lowered to 25 percent over the next four years – meaning that it will only fall to 28 percent next year.

The reduction of social security contributions made by freelance professionals will be smaller next year than this year, because as of 2019 the contributions will be based on 100 percent of incomes and not 80 percent as is currently the case.

Concerning 2018 in particular, Tsipras made no reference to the offsetting measures voted through, as it is clear they will be sacrificed in case the pension cuts can be avoided. He only referred to the rental subsidy, but restricted that to 300,000 households, against the 600,000 originally planned for inclusion, costing 600 million euros. Other offsetting measures, such as nurseries, school meals etc, were not even mentioned.

The reduction of the Single Property Tax (ENFIA) scheduled among the offsetting measures of 2020 will come a year earlier but with a limit that reduces the benefit of the measure for property owners to just 200 million euros in 2018. The value-added tax rate reduction is so remote – 2021 – that in practice it is void of significance for the time being.

A decision on the pension cuts – a major gray area – is likely to be taken in November, with the submission of the final budget draft. Sources say the creditors would prefer pensions to be cut as planned, but the European Commission has an alternative plan for the postponement of the measure till April 2019.

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