Greece asks for selective tax relief

The Finance Ministry has submitted a request to Brussels for approval to cut the rate of value added tax (VAT) on selected consumer items such as motorcycle helmets and computers. Deputy Finance Minister Antonis Bezas submitted the request to lower the tax on farming equipment, helmets, computer software and hardware equipment sold to students. Bezas had made the same application to the European Commission in early 2006 but the assessment procedure became bogged down due to enlargement of the EU bloc. Before taking a decision on the procedure, the European Commission has requested a report on the potential impact the tax cuts might have on the Single Market. It was not clear what the impact on the government’s budget might be from the proposed tax cuts, which mainly involve the education sector. The Commission is expected to begin assessing the request in a procedure that will start in January next year and run through to September. The government has been implementing a tight fiscal policy in a bid to keep the budget deficit to below 3 percent of gross domestic product (GDP), in line with EU rules. Greece is aiming for a balanced budget by 2010. Greece’s highest VAT rate currently stands at 19 percent but there has been widespread speculation that the Finance Ministry will increase it to 21 percent to help support budget revenue growth. Government officials have declined to comment on the issue.