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Confrontation in the government as regards VAT and the poor

23 April 2013 / 21:04:13  GRReporter
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Victoria Mindova

The partners in the tripartite coalition government in Greece have opened a new front of opposition. Several days before the vote on the critical bill to change the tax system, PASOK and the Democratic Left demanded concessions for the poor and the unemployed.

"The macro economic situation in the country makes it possible to reduce VAT in catering," insisted PASOK representatives after the meeting with the Minister of Finance. They demand the immediate reduction of VAT from 23% to 13% in order to enhance tourism in the early summer.

Evangelos Venizelos’ party wants the government to allow a larger number of citizens to benefit from the deferred payment of debts to the state. This includes outstanding amounts to health and pension funds and to the tax services. In addition, PASOK insists on allowing the unemployed and the people without health insurance to take advantage of free health services as part of the support programme for the poor.

According to the data of the National Statistical Service as of the end of 2012, 20% of the population have been living below the poverty line. This group includes about 870,000 households or 2.2 million people.
 
"The government has an open line of communication with the representatives of the supervisors of the International Monetary Fund, the European Commission and the European Central Bank, which we can use to put new proposals on the negotiating table," says PASOK. The lenders’ mission left Athens a week ago and these issues were not discussed. The chances for the government to make last-minute changes are small as estimated by analysts.

The Democratic Left, which is the third party force in the coalition government, insists on exempting poor and long-term unemployed people from property tax payments.

Over the past two years, the property tax has been indiscriminately imposed and it has brought significant revenue to the state treasury. The property tax was adopted in the middle of 2011 as a temporary measure to bring in 1.7 billion euro. In 2012, it became a permanent tax and brought in the budget revenue amounting to 2.2 billion euro.

The attitude towards the property tax in Greece was very negative and it was called "poll-tax," similar to the statutory tax imposed during the Ottoman rule. It is included in electricity bills and until recently, the people who could not pay it were at risk of remaining without electricity. After the recent negotiations with the supervisory Troika, the government has decided that it will not switch off the electricity of households because of unpaid tax but has refused to remove it from electricity bills.

"It's hard to make changes," states the Ministry of Finance, thus making it clear that New Democracy will not give up the measures that have been already agreed with the international lenders and that should be adopted. The payment of the next 2.8 billion euro of the financial aid depends on the changes.
 
"PASOK’s demands are not feasible, they are purely populist and aim at promoting the socialist character of the party, which has been untrue to its ideological beliefs in recent years. It is doing this with the sole purpose of remaining in power," local economic analysts told GRReporter after the meeting.

Tags: EconomyMarketsPoliticsNegotiationsLendersGreeceCrisis
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