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Greek Parliament Backs Austerity Measures

by Ulrika Lomas,, Brussels

10 May 2010

In a bid to secure the EUR110bn three-year bailout package agreed with the European Union and the International Monetary Fund in Brussels recently, the Greek parliament has approved the latest wave of austerity measures unveiled recently by the government, including a number of significant tax rises.

Adopted by 172 votes to 121, the bill includes key tax initiatives, including plans to raise the value-added tax rate to 23%, and to increase the tax levied on fuel, alcohol and tobacco by 10%.

In addition, the legislation includes a windfall tax on 2010 corporate profits, starting at a rate of 4% on profits up to EUR300,000, rising to 10% on profits of more than EUR5m.

Other initiatives contained in the bill include plans to freeze public sector pay until 2014, to increase the average retirement age by two years, and to cut public sector wages and pensions.

Although the decision is likely to provoke further anger and protests, with public and private sector unions vowing to continue to oppose the government’s plans, Greek Finance Minister George Papaconstantinou has warned that the austerity measures are unavoidable if Greece is to avoid bankruptcy.

The measures are designed to drastically reduce the country’s public deficit from 13.6% currently to below 3% of GDP by 2014, by realizing fresh budget cuts of around EUR30bn over the course of the next three years.

TAGS: tax | value added tax (VAT) | fiscal policy | retirement | budget | corporation tax | excise duty | tax rates | Greece

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