IMF presses for reforms

The government’s top priority should be to reform the social security system, according to International Monetary Fund experts, who were «impressed by the consensus among the social partners on the need for reform.» An IMF delegation visited Greece recently and has submitted to the government their conclusions. These include a more modest economic growth forecast, admonishments of the need to control spending more tightly and an exhortation to the government to seize the moment and deepen reforms. Contrary to the government’s forecasts for 3.8 economic growth in 2002, the IMF believes growth will decelerate to 3 percent next year and calls the 2002 budget figure «optimistic.» It believes there is considerable risk of a sharp downturn in the tourism sector in the aftermath of the September 11 terrorist attacks on the US. The report applauds efforts to reform an «excessively complex» and «inequitable» tax system but remarks that tax reductions were not accompanied by cuts in expenditure. It says Greece should aim for higher budget surpluses. (Page 5) According to the introductory report which Christodoulakis presented to Parliament, the overall revenues of the regular budget are expected to come to 38.92 million euros next year, an increase of 6.1 percent from 2001. This increase is based mainly on expected GDP growth, which, at 3.8 percent is down from an earlier estimate of 4 percent, which in turn was down from as high as 5 percent earlier this year. Revenues from direct taxation are forecast to reach 14.617 million euros (an increase of 7.2 percent), on the basis of taxes of past financial years which show an increase of 19.7 percent. Indirect taxation is expected to yield revenues of 20.666 million euros (an increase of 5.3 percent). Value-added taxes are forecast to increase by 8.4 percent, mainly on account of more robust economic activity. Revenues from capital transfer taxes are expected to rise by 17.2 percent. Officials are showing great restraint in their expectations of revenues from taxing share transactions, after budgeting 430 billion drachmas for this year and then seeing real revenues barely reaching 60 billion drachmas. They now expect this form of taxation to harvest about 80 billion drachmas next year.

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