Wednesday, 18 February 2015

Greek government to resolve 76bn euro "debt bomb" of tax arrears

The Greek government will try to boost its falling revenues by offering taxpayers discounts of up to 50 percent of their arrears if they sign onto an instalment plan.

The offer expires on April 30 and is designed to bring a cash injection to fast-emptying state coffers.

Tax revenues have fallen sharply since October, when the government estimated it would have a primary surplus of 6.1bn euros for 2014. That surplus fell to 1.87bn euros, well below a target of 4bn set by creditors.

Tax debtors who refuse to sign onto the plan despite having provable income will be penalised.

"For people who by income are able to enter the instalment plan and refuse, there will be no mercy," said alternate finance minister Nadia Valavani. "There will also be no mercy for large debtors," she said. 

Valavani said she hoped to resolve a 76bn euro "debt bomb" to the state, almost two thirds of which has accrued during the past five years of austerity policies. 

However, she revealed that 97 percent of this debt is owned by just 11 percent of debtors. She did not explain how the new leftwing government would prosecute collection of debts from high net worth individuals and enterprises. She did, however, admit that the “effective receivable amount” of tax, which excludes bankrupt companies, state enterprises, debtors with bank debt and tax arrears being disputed in litigation, was just nine billion euros. 

That suggests that the government may fall short of an election pledge to collect three billion euros a year by rescheduling arrears. It also suggests that the ruling Radical Left Coalition, Syriza, elected to power last month, will have to place greater emphasis on active pursuit of tax evasion - an area where Greece has not traditionally met with success. 

Tax collection is a major sticking point as Greece tries to negotiate a loan extension with its creditors, who expect the government to collect about 4bn euros less than forecast this year. That gap would widen if the government abolished a despised property tax and restored a 12,000 euro tax exemption, as it has promised to do. Together they bring state coffers more than 3.5bn euros. 

The government will also decriminalise tax arrears of up to 5,000 euros, Valavani said, relieving 3.5 million people of the threat of imprisonment and confiscation of property. A bill containing these measures was to be presented to parliament by early March. 

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