Greek Finance Minister Defends New Tax Measures

by Ulrika Lomas, for LawAndTax-News.com, Brussels

02 September 2008

Greek Finance Minister George Alogoskoufis has spoken out this week to defend the introduction of a tax package, including a 10% tax on capital gains from share sales, which is being brought in to boost budget revenue and the public finances as the economy slows, and to keep the Greek economy on the right side of the EU's 3% of GDP budget deficit ceiling.

Last week, it was announced by the Greek government that a raft of new revenue-raising measures would come into force within the country as part of a deficit reduction package, although it also signalled that corporate and individual income tax rates would fall by 5% over the next five years.

The fiscal plan calls for a new 10% tax to be imposed on capital gains made from selling shares, and a new 10% tax on stock dividends, both applicable from January 1, 2009. The existing 0.15% share transaction tax will be gradually phased out from next year.

In a bid to tackle tax evasion by the self-employed, these taxpayers will now have to pay tax at 10% on their first EUR10,500 in annual earnings. Previously, the self-employed were exempt from tax on the income earned under this threshold, but the government has noted a sharp rise in the number of professionals and tradesman declaring total earnings just below the EUR10,500 mark. There will also be incentives for people to clear tax debts by making it easier to pay off back taxes.

Under another revenue-raising measure, tax on car licences will increase by 20% this year.

"We want to be at a safe distance from 3%, not just below it," Mr Alogoskoufis explained to the Kathimerini newspaper on Sunday.

"Apart from the crisis, there is a need for Greece to attain a fiscal adjustment of about 0.5% of GDP every year until it reaches a balanced budget. For as long as there is a deficit we must be reducing it by half a percentage point. It's not an insignificant amount," he reportedly added.

Mr Alogoskoufis was reportedly defending his proposals against a backlash from unions.

Over the longer term, Alogoskoufis has sought to reassure that he wants to see a fall in the overall tax burden, as demonstrated by the recently announced plans to decrease both corporate and individual income taxes, starting next year.

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