Budget faces 466-mln-euro hole

Budget faces 466-mln-euro hole

The maintenance of the tax-free threshold at its current level beyond 2020 will create a fiscal hole of 466 million euros despite the abolition of the countermeasures that had been scheduled for next year, while the European Commission is accusing the government of constantly overestimating its investments without implementing them.

The law amendments tabled on Thursday in Parliament keep the tax-free threshold at 8,636 euros per year, while abolishing the 30 percent discount on the Single Property Tax (ENFIA) in cases when it does not exceed 700 euros, the reduction of the lowest income tax rate from 22 percent to 20 percent, and the scrapping of solidarity levy obligations for incomes up to 30,000.

The report by the State General Accounting Office showed that the cancellation of the tax-free threshold reduction entails a revenue loss of 1.92 billion euros for 2020, while the abolition of the so-called countermeasures generates a benefit of 1.454 billion euros. This means that next year there will be a shortfall of 466 million euros, plus another 239 million euros for 2021.

However, the hole could grow further in 2020, as several government officials argued on Thursday that the countermeasures should be preserved after all, although Finance Minister Euclid Tsakalotos and his alternate, Giorgos Houliarakis, would not be swayed.

Meanwhile Brussels cautioned Athens over its systematic excesses in investment provisions in the budget, which are allegedly the source of the primary surplus overruns, according to the third enhanced surveillance report by the European Commission.

Sources in the Finance Ministry acknowledge that the government deliberately created a “cushion” in expenditure, but argued that it had “good intentions,” explaining that this strategy was meant to cover possible excesses in spending by entities that the ministries were unable to control. Then, by the end of the year, the cushion that went unused was convenient in order for the government to present a primary surplus that beat its target.

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