‘It is wrong to say the lower-income brackets are affected’
On every point in the report, the lower- income brackets are adversely affected as indirect taxes (such as on VAT and gasoline) are raised. Thank goodness our proposals are in writing. What the commission says is that stamp duty and all other indirect taxes should be abolished, as they have a negative effect on the economy. Of course, these taxes are paid by consumers. According to research, these are the most regressive taxes. We also point out that the some 460 million euros’ (160 billion drachmas’) worth of stamp duty that has been lost must be recovered. This can only happen by increasing income tax or special consumer taxes (particularly on gasoline) or by other VAT arrangements. The commission believes that increasing VAT rates should only be a last resort, as it would increase tax evasion and lead to inflationary pressures. It would be desirable if part of this stamp duty could be replaced by indirect taxes in order to improve the balance between indirect and direct taxes. It would be even better if it did not need to be replaced at all, but could be covered by containing expenditures. What the commission has done is to set out all the alternatives and recommend the best one. Even if we have to resort to increasing VAT rates, it would still be preferable to stamp duty, which is the most regressive form of taxation in our system. Those who have been so quick to criticize us, and can only see the possibility of increasing VAT, forget this. All they need to do is to read the report. As civil servants, we should not suggest reductions without proposing other ways to obtain income if necessary. Deficits are the worse kind of taxation, one in which we have bitter, recent experience. I am not about to run for mayor of Athens, nor found a political party. I am sure that what we propose will be carried out and that after some time Greek taxpayers will have a better idea of what the issue is all about. How do you justify the abolition of certain income tax deductions when some of them, such as rent and school fees, involve sensitive issues? International experience shows that these deductions are unjust, as they are of greater benefit to higher-income groups. We suggest that all taxpayers have the same benefit, by recognizing an additional tax-free threshold that will reduce their taxation by the same proportion. We don’t see why this is unjust. Isn’t it unjust for those who do not fulfill these criteria to also benefit from these deductions? Yes, but on average, these injustices will balance out in the long term. For example, someone who now pays rent might later buy an apartment. Someone who pays school fees for his children won’t have to forever, and yet will continue to enjoy the benefit of the tax threshold. Let us not forget how difficult our lives have been because of the complexity of legislation and the continual changes to it. Tax deductions are a characteristic example of the system’s complexity. We are trying to minimize the deductions and one might well ask which ones will remain. Social security contributions are in fact taxes and should be deducted, as in all OECD states. As for interest paid on loans for a first home, one cannot cut this tax deduction on old loans as the state would lose its credibility. Nor can one allow them on old loans and abolish them from new loans; that is why we are proposing to retain these deductions and convert them to a reduction which we think is more just.
