Gov’t casts about for revenues

The government may increase levies on heating oil in a bid to offset a possible drop in revenues arising from a decision to hike value-added taxes on a large category of items, said government spokesman Giorgos Petalotis yesterday. Greece is considering putting off a decision to shift several goods and services into the 23 percent VAT category, from 11 percent currently, in a bid to protect household incomes hit hard by the austerity measures recently adopted. According to some estimates, households have seen their disposable incomes fall by as much as 25 percent in the last six months due to the repeated tax hikes aimed at shoring up state finances. «We are examining all the alternative proposals in order to avoid a large-scale shift of goods toward the 23 percent tax rate, as specified in the memorandum,» said Petalotis. Government sources indicated earlier this week that the International Monetary Fund and the European Commission, who agreed in May to lend Greece 110 billion euros, have given the green light to postponing the VAT hike as the economy moves deeper into recession. However, such a move would cost the state 1 billion euros in lost revenues that will need to be recovered from other sources. Petalotis said the government is looking into ways it can change the taxes applicable on heating oil in a way that will limit the illegal trade in fuel, which costs the state millions in lost revenues each year. «We know very well that there are many possibilities… to limit illegal activities stemming from the treatment and distribution of oil,» he said. In a bid to limit the political fallout from such a decision, the Finance Ministry is considering upping the tax payable on heating oil but offering low-income earners and residents in some parts of Greece a benefit to partly offset the extra expense.

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