Gov’t to handle CoS rulings with pension reform, tax case closure

Gov’t to handle CoS rulings with pension reform, tax case closure

In the wake of the Council of State’s recent decisions on the unconstitutional provisions of social security legislation introduced in 2016, which will place an extra burden on the state budget, the government expects to convince the country’s creditors that there will be no fiscal gap in 2020, and is preparing a measure in case the lenders insist on their estimates.

That measure is the closure of pending tax cases (“peraiosi”), which entails the payment of a “closure fee” to the tax authorities. According to one senior government official, the preparations are in the final stages, with the measure concerning the financial years since 2013. This is expected to fetch at least 1 billion euros into the state coffers next year.

In principle, the creditors are against “peraiosi” and the various other settlements, arguing that they detract from the payment culture. However, the same government official says it is at Athens’ discretion to apply the measure should the creditors insist a budget gap is anticipated. He adds that at least the “peraiosi” will prevent thousands of unchecked cases from coming under the statute of limitations, which would leave the state with no revenues from them.

Meanwhile the government is already preparing a new social security reform after the country’s highest administrative court issued its verdicts on Friday. The CoS issued its decisions at great delay, although it did rule their application is not retroactive, which means they only apply as of last Friday.

The Labor Ministry is now scrambling to promote changes to auxiliary pensions, more proportionate replacement rates for pensioners who retired after May 13, 2016, and fairer social security contributions for the self-employed, freelance professionals and farmers.

All interventions were already on the government’s agenda, as the clauses of the Katrougalos law that the CoS has deemed unconstitutional had originally been listed by New Democracy as problematic.

The ministry is examining ideas for changes to the calculation of contributions by the self-employed, freelance professionals and farmers, aiming at the complete dissociation of what they pay into their pension funds from their declared revenues, which are often deliberately misrepresented in their tax declarations. Instead a system assessing their real incomes will be reintroduced.

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