Asset repatriation hoped to boost investment and taxes

Facing strong pressure in public finances and eager to attract investment funds, the government yesterday unveiled details of a scheme designed to entice Greek taxpayers who keep capital assets abroad into repatriating at least 4 million euros of them. According to a decision signed by Economy and Finance Minister Giorgos Alogoskoufis, those repatriating such assets are offered the opportunity of paying a one-off, 3 percent tax on them and are exempted from any other tax obligation, with no questions asked. The only requirement set by the decision is that the repatriated funds, which may be either deposits or investment assets, must be proved to have existed up to August 4, 2004, the date on which the relevant law came into force. Although the volume of available funds for potential repatriation is largely a matter of speculation, officials say it may amount to as much as 70 billion euros. Likewise, estimates of the funds that may be attracted vary widely. Sources say that the General Accounting Office puts this figure at up to 20 billion euros, but Alogoskoufis takes the view that the measure will be considered a success if it brings in just 4 billion, which would mean a tax revenue of 120 million euros. Officials dismiss views that the measure is an opportunistic reaction to fiscal stringency, and insist it is part of an effort to enhance Greece’s international financial role and create a friendlier investment environment. They cite the success of a similar Italian scheme, which led to the repatriation of about 98 million euros. The ministerial decision stipulates that transfers must take place through bank accounts. Investment assets that may be repatriated include shares, bonds and mutual funds. Non-listed assets, such as deposits, will be taxed at their nominal value without having to be converted into euros. Assets listed in a securities market of a member state of the Organization for Economic Cooperation and Development (OECD) will be evaluated according to the closing price on the day they are transferred to an investment account in a Greek bank, again without having to be liquidated. A similar effort for the repatriation of funds – in large part sums smuggled out in past decades when foreign exchange controls were still in place – had been announced by the previous PASOK government, but was eventually abandoned after protests that it would lead to money laundering. Sources said a further decision will set a deadline for the application of the measure at the end of February 2005. Revenue shortfall The General Accounting Office said yesterday that budget revenues in the January-September period were up 4.5 percent year-on-year, against an annual target of 8.5 percent. Expenses were almost on target, up 11.3 percent, against a target of 11.5 percent. Interest payments increased 1.7 percent to 7.5 billion euros. Public Investment Program revenues rose 91.3 percent, against a target of 66.8 percent, while expenses were up only 1.9 percent, compared to a target of 12.4 percent. As a result, the budget deficit in the nine months rose 18.9 percent, year-on-year, to 8.83 billion euros.