Fiscal measures put off

The ruling conservatives have decided against introducing new measures aimed at stamping out tax evasion despite major difficulties in implementing its fiscal policy as it fears the political backlash, according to sources. At a meeting with Prime Minister Costas Karamanlis last week, National Economy and Finance Minister Giorgos Alogoskoufis was instructed to put off any steps to boost state revenues from the country’s self-employed professionals. The government is nervous about the dissent being heard from within the ruling party, according to a source. The Finance Ministry is believed to be working on a list of ways to increase revenue as an economic slowdown has put the 2008 budget goals at risk. According to data from the first six months of the year, Greek budget revenues rose 5.7 percent, falling well short of the targeted 12.1 percent annual growth rate, amid signs that the government may soon be forced to revise its 2008 fiscal goals. The government cannot afford to risk losing any support right now, the source added. The ruling conservatives currently hold a slim two-seat majority in Greece’s 300-seat Parliament. Any additional measures aimed at small or medium-size businesses are seen as potentially risky as these companies enjoy the backing of many powerful union groups. Ridiculously low amounts being declared by many self-employed individuals had prompted the Finance Ministry to consider introducing a flat tax rate in the sector. Senior government officials frequently announce plans to stamp out tax evasion but this never really appears to be at the top of their agenda in practice. Tax dodgers and businesses not paying social security contributions are each year costing the country more than 21 billion euros, or some 10 percent of gross domestic product (GDP), according to government figures. Other measures aimed at upping revenues with the minimal political cost include the introduction of a capital gains tax on shares, the sources added.