Measures to battle the deficit

The government is likely to approve this week the first package of measures intended to bring the budget deficit to below the European Commission’s cap of 3 percent of gross domestic product by the end of 2010. The measures are exclusively intended to bolster revenues by about 1 to 1.5 billion euros. The special consumption tax on fuel will probably go up by about 10 percent, which will mean a rise in the cost of unleaded gasoline by 4.5 to 6.5 euro cents per liter. The special consumption tax on cigarettes and alcoholic drinks will also go up. Prepaid card cell-phone users will have to start paying a special levy, calculated as 10 percent of the cards that their owners purchase. There will also be an adjustment of the cell-phone levy for those who have a contract with a network. In order to reduce the negative impression and the political cost created by these measures, the government will add some fresh changes intended to reduce tax evasion. The Economy Ministry is aiming to close some loopholes, such as that concerning recreational boats by abolishing tax-free fuel for them, and by expanding the range of receipts that could increase exemptions from annual taxable revenue. At present, 40 percent of spending on restaurants, celebratory functions, electricians, plumbers and such services is exempt from taxable income. The government is planning to expand this to include spending on other services, such as car repair shops, dry cleaners, private schools, hotels and rented rooms, cafeterias etc. However, these measures are not enough to satisfy the demands of the European Commission, which should mean that more measures could be expected in October.