Cabinet approves fiscal plan, new tax hikes

A medium-term fiscal plan that will see Greek taxpayers, particularly middle-class ones, have their wages eaten away even more by rising taxes was approved by the Cabinet on Thursday, as the government now braces for what promises to be a stormy debate and vote in Parliament.

During a lengthy session the Cabinet approved the new austerity scheme, which seeks to raise via tax hikes and public spending cuts close to 6.5 billion euros this year. The plan runs to 2015, by which time the Greek government hopes to have saved almost 30 billion. Athens hopes that this will be enough to secure a second bailout that will reportedly be worth between 90 and 120 billion euros.

Although the details of the midterm plan will not be known until it is submitted to Parliament, sources said that one of the key measures will be an additional income tax, that will apply retroactively. Taking advantage of the fact that 2010 tax declarations have not yet been processed, the government will impose an extra tax of between 2 and 4 percent on incomes from last year. The supplementary tax will last at least until 2015.

Property tax will also increase. Currently, homeowners with properties valued at under 400,000 euros by the tax office are not taxed. However, the threshold will plummet to 200,000 euros under the new measures.

A rise in taxes on vehicles with large engine capacity is also on the cards, as is a rise in value-added taxes for restaurants and cafeterias. One issue that appeared to remain unresolved was whether the duty on heating oil would be increased so it matches the tax on gasoline.

The cabinet meeting passed without any major objection to the measures from the ministers who took part. Finance Minister Giorgos Papaconstantinou gave them an opportunity to express their views on the measures, which are likely to be voted on in Parliament next week.

Although the government has a six-seat majority in Parliament, its deputies have been growing increasingly vociferous in their opposition to Greece?s economic policy and the intervention of the European Union and the International Monetary Fund. Prime Minister George Papandreou got a taste of this opposition when he chaired a marathon session of PASOK?s political council on Wednesday. The meeting began in the evening but did not end until 3 a.m. on Thursday. PASOK members were particularly insistent on being told whether Greece?s new bailout will mean the country?s assets being put up as collateral or whether foreign officials will have a say in the privatization program.

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