Tuesday, 23 June 2015

Creditors' measures leak

Officially unconfirmed reports from Brussels summarise this year's fiscal measures being imposed on the Greeks as below. They would extract an extra 2.7bn euros from a stagnant economy this year, and 5.2bn euros next year (1.5 and 2.9 percent of GDP respectively).

These measures are designed to keep the budget balanced and produce primary surpluses of one and two percent respectively.

However, they would further burden Greek enterprise, which is already struggling with a steep drop in demand this year, an almost complete lack of investment liquidity in banks for the past six and a half years, increased taxes on property and profits, and for importers the loss of customary three-month credit from their overseas partners.

The measures will also scrap the ruling Syriza party's promise to abolish a crisis-era property tax and to refuse to impose recession-producing measures such as new taxes; in fact the measures ensure that 2015 will see another steep recession, with dark prospects for 2016 as well.

  • Increase in corporate tax from 26 percent to 29 percent
  • One-off levy of 12 percent on corporate profits for companies with turnover of 0.5mn or more over and above regular taxation
  • Increase in solidarity contribution (this is a surtax on personal income of between one and four percent on salaried and self-employed workers, introduced in 2011 retroactively as an extraordinary income measure)
  • More progressive income tax code for 2016 which more heavily taxes farmers, capital, investment vehicles and the self-employed
  • Tax on television advertising to raise 100mn a year
  • Increase in luxury tax from 10 percent to 13 percent, and its retroactive implementation to 2014
  • Property tax (ENFIA) must generate 2.65bn a year regardless of revisions in zonal property rates
  • Pension contributions increase by 3.9 percent for IKA (Social Insurance Foundation, the country's largest insurer) 
  • Pensioners will pay increased contributions for healthcare
  • Workers pay increased contributions to supplementary pension funds 
  • 200mn euro reduction in military spending 
Further reading on the current package under discussion and Greece's two previous bailouts on Navigator Consulting

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