No new taxes in bid to boost economy

Despite the need to generate more revenues as part of the drive to bring Greece’s public deficit back down to eurozone levels by the end of next year, sources told Sunday’s Kathimerini that the government is not considering introducing any new taxes next year for fear of stifling the economy. Economy and Finance Minister Giorgos Alogoskoufis has already brought in Value Added Tax (VAT) rises this year, increasing the main rate from 18 percent to 19 percent. However, sources said that during talks with European Economic and Monetary Affairs Commissioner Joaquin Almunia at the sidelines of an Ecofin meeting in Manchester last weekend, Alogoskoufis ruled out any further tax rises for 2006. Almunia is due to visit Athens on October 5 as the Commission continues to keep an eye on Greece’s efforts to meet the target set by the EU – to reduce its deficit to below 3 percent of GDP by the end of next year from over 6 percent in 2004. But the finance minister believes that the rise on VAT has not had the desired impact and wants to clamp down on tax evasion while limiting public expenditure as a means of chopping away at the deficit. In fact, Alogoskoufis reiterated his intention to cut taxes from 2007. «With regard to personal taxation,» said the minister, «I have what I would call a vision to make a real incision into the tax system which would change the status quo and profit Greek taxpayers,» he told Sunday’s To Vima newspaper. Alogoskoufis said his intention was to introduce a single personal tax rate of 25 percent in 2007. Corporate taxes are also due to drop to 25 percent from 35 percent the same year. This measure is likely to be welcomed by middle-income wage-earners as, according to the current system, the top rate is applied to incomes exceeding 23,000 euros. Alogoskoufis also said he was looking to raise the tax-exempt portion of income. «We have already started the preparation and study for this reform, which will start in 2007,» he said. He did not give precise figures but it is thought the minimum taxable rate will increase from 11,000 to 13,000 euros. In its effort to cut the deficit, the government is also planning to target tax dodgers including some high-profile offenders, sources said. Checks through the Finance Ministry’s General Secretariat of Information Systems have turned up 4,145 cases that are being investigated further. Privatizations are also set to continue, with the government already looking at how it is going to sell off its stake in Emporiki Bank. A team of International Monetary Fund (IMF) experts, which visited Greece last week, urged more privatizations.