Minister calls on businesses for help in reducing deficit

Economy and Finance Minister Giorgos Alogoskoufis confirmed yesterday that businesses will be required to pay a higher proportion of their corporate tax up front, that means almost as soon as they have submitted their income statements, and that this amount will gradually increase to reach the levels in other European Union countries. The government submitted on Monday an amendment increasing the amount of corporate tax to be paid up front to 65 percent for all corporations other than banks (from 55 percent previously). For banks, the amount of tax paid up front increases to 80 percent, from 60 percent previously. It is expected that the provision will be further amended to include further increases over the next few years. Acknowledging the negative reactions from businesses, Alogoskoufis said that «the country must adapt to European Union norms, where, in several countries – such as Germany and Denmark – businesses are required to pay up front up to 100 percent of corporate tax due.» He called on businesses to adapt to the new situations and to help the effort to reduce fiscal deficits, «the result of which will reflect on each one of us, without exception.» Alogoskoufis’s comments reflect the government’s pressure to achieve ambitious revenue growth targets this year in order to help reduce the deficit to below 3 percent of Greece’s GDP. The European Union has not decided whether to give Greece a further year to achieve this deficit target: Earlier this week, European Economic and Monetary Affairs Commissioner Joaquin Almunia said that a final decision will not be reached before March, at the earliest. However, there seems to be pressure on Greece to at least come close enough to achieving the target in order to avoid fines and cuts in EU aid programs. Businesses have reacted strongly against that, because the measure, which will affect them in April, is expected to create liquidity problems for several of them. Speaking before Parliament’s Economic Affairs Committee, Dimitris Daskalopoulos, vice chairman of the Federation of Greek Industries (SEV), said that there exists «a climate of constant uncertainty regarding taxes» and that the measures constitute «a sudden reversal which upsets the climate of confidence and puts businesses’ plans in disarray.» Daskalopoulos, who is also the chairman and CEO of dairy group Delta Holdings, said that small and medium-sized enterprises will find it hard to adapt to this measure and commented that this was not really an issue that affected corporations’ overall tax burden but their planning. «Enterprises have built their investment plans around the fact that they would have to pay less corporate tax this year. Whatever upsets their plans is negative,» he told MPs, adding that liquidity is even more important for companies than profitability. When an MP remarked that in several EU countries companies paid the entire amount of corporate tax due up front, Daskalopoulos replied that he had no problem with that, «as long as the legislation is clear, with no last-minute surprises.»

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