Friday, 5 September 2014

Greek surplus could ease austerity

Greece this week announced that it has generated a primary surplus of 3.2bn euros over the first seven months of the year, trumping a 2.9bn euro surplus last year.

"This is a clear indication that public finances are settling into a pattern of primary surpluses, and this creates the basis for growth with social justice," said a statement from deputy finance minister Christos Staikouras on Wednesday.

Expectations are high among portions of the Greek media that Prime Minister Antonis Samaras will make significant policy concessions at his inaugural speech to the Thessaloniki International Fair on Saturday morning. The annual speech is traditionally a keynote for Greek prime ministers to foreshadow their economic policy for the year ahead, before the budget is presented to parliament by early October.

Two small concessions have already been made. Public transport tickets fell to 1.2 euros on Monday, down from 1.4 euros. And the government has in principle cleared the way for a reduction in property tax, introduced in August 2011 as an emergency revenue measure.

Further revenue measures introduced during the four-year Greek crisis include a VAT hike from 19 to 23 percent (2010), a 30 percent increase in heating oil (2012) and a solidarity tax amounting to a surcharge on income of between two and five percent (2011).

Samaras has been keen to ease the burden on taxpayers and especially businesses. Last year his government reduced VAT to 13 percent for restaurants and made an abortive attempt to reduce the price of heating oil. In April he announced that small businesses and the self employed will have VAT reimbursed at the end of this year for the first time.

Businesses and the self-employed are obliged to pre-pay 23 percent Value Added Tax on their turnover each month, or face hefty fines of at least 500 euros. In theory, the state reimburses much of that VAT at the end of the year, once businesses and traders have presented expenses in their tax statements. In practice, however, the state has failed to disburse the cash, holding it as credit against future tax obligations and sucking up liquidity.

Last September, during the annual Thessaloniki speech, Samaras said that one of the first goals of his tax policy would be to lower corporate tax rates from 25 percent to 15 percent.

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