ECONOMY

Last touches applied to tax plan

The Finance Ministry is putting the final touches to changes in taxation being finalized which will be presented to representatives from the European Central Bank, European Commission and International Monetary Fund in about 10 days. Changes to value-added tax rates, hikes in cigarette levies, the suspension of a planned capital gains tax on stock market transactions, a reorganization of revenue collection services and a cut in corporate tax rates are among the planned changes that are likely to be accompanied by a further reduction in allowances payable to public servants. The Finance Ministry is tallying up the 2010 shortfall it needs to cover next year and discovering that many more measures are needed to fill the budget gaps. Finance Ministry sources have said that the reduction in the 2011 budget deficit will be smaller than first planned, due to the lower-than-targeted revenues collected this year, the 2009 budget figures that will be soon revised higher and a larger-than-expected recession forecast for 2011. These developments will lead to a new round of negotiations with Greece’s international lenders, the European Union and the IMF, which could also lead to additional austerity measures that will further weigh on consumption. According to sources, the Finance Ministry is looking into the prospect of increasing the 11 percent VAT rate to 12 or 13 percent. Along with this there may also be a hike in the 5.5 percent VAT rate to 6 or 6.5 percent. Another option being considered by the Finance Ministry is upping levies imposed on tobacco products. Despite three recent consecutive tax hikes in tobacco tax, revenues from this source have fallen short of government forecasts.