Corporate tax must be reduced further, the Bank of Greece advised in its intermediary report released on Friday, noting that, at 28 percent, its current rate in Greece is eight percentage points above the European Union average. The 2020 budget provides for a reduction to 24 percent.
In his report, Governor Yannis Stournaras pointed to the need for a virtuous combination that will include the reduction of the primary surplus target, a further cut in taxation, the strengthening of public investments and the expansion of structural reforms. This combination, he argued, would have a favorable impact on growth and the long-term sustainability of the national debt.
In a special chapter of the report, the central bank illustrates that the reduction of corporate tax by 500 million euros per annum would not only lead to an increase in gross domestic product, but also only have a very small impact on the primary surplus. Combined with reforms that would improve tax compliance (by one percentage point), the net result would be positive over a five-year period: It would raise GDP by 1.75 percentage points and increase the primary budget surplus by 0.52 percentage points.