Troika inspectors scrutinize closely Greek tax system

[poppy1]

26th April

Troika inspectors scrutinize closely Greek tax system for call for additional saving measures
I. Tax system reform
Three technical teams of troika inspectors arrived in Athens earlier this month to discuss with government officials pending issues related to a major upcoming overhaul of the domestic national tax system and additional austerity for the period 2013-2014 that need to be identified by next June as part of the revised Medium-Term Fiscal Strategy (MTFS) plan (ca 5.5%-of-GDP of new expenditure cuts on top of 1.5p pts-of-GDP extra revenue from fighting tax evasion).
March 2012 - is now expected to be enacted by the end of June 2012. The basis for the envisioned changes in the new taxation system will reportedly be the IMF and European Commission’s proposals - included in their recently released reports (“Greece: Request for Extended Arrangement Under the Extended Fund Facility - Staff Report” and “The Second Economic Adjustment
Programme for Greece”). Among others, these should include:
i) elimination of several tax exemptions (related to e.g. medical visits and hospital fees) and of special privileged status for certain taxpayer categories;
ii) abolition of the VAT discount on islands and an end to reduced income tax rates for those who live in islands with fewer than 3,100 inhabitants;
iii) abolition of tax exemption for arable land;
iv) reduction in income tax brackets from 8 currently to 5, including a reduction in the upper tax rate for personal incomes to 40% from 45% currently. A reduction to the tax-free threshold of €5,000 per year to €3,000 or its complete elimination may also come under consideration;
v) VAT rates to remain unchanged. This comes as somewhat of a surprise as a number of recent press reports suggested that the IMF delegation was considering to propose the imposition of a single VAT rate 19%-21% on all goods and service;
vi) adoption of a uniform tax for all business and legal entities at 20% initially, with a option to reduce it further (to as low as 15%) once domestic economic conditions stabilize;
vii) unification of all property taxes in two; one that would comprise the property tax and the special property levy paid via electivity bill and a second one to be paid in favor of local government;
viii) revision of the method for calculating the objective values of properties;
ix) new tax criteria for self-employed based on business profitability and living standards;
x) and the replacement of the Code of Books and Records with simpler legislation;