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The IMF wants austerity for an additional 14 billion euro

17 March 2012 / 14:03:05  GRReporter
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The International Monetary Fund has indicated the necessity of the frugality, of 14 billion euro (nearly 7% of the GDP) in order to reach the fiscal targets for 2013 and 2014, warning that any delay in the structural changes will lead Greece to an even deeper recession.

In a report released only a day after the approval of the loan for Greece for 28 billion euro, the International Monetary Fund stated that the amount of 14 billion euro should be derived from the measures and changes in the tax system. As for the lay-offs in the public sector and the reduction of salaries the institution noted that reducing labour costs by 9.5% has improved the competitiveness, but there is still a "gap" of 15-20%, which must be filled.

Experts from the Fund also repeated that an adjustment of the GDP by about 7% is necessary, without which it would not be possible to achieve a primary surplus of 4.5 percent of the GDP in 2014.

The report recognizes that the imposition of new taxes would create new obstacles to the economic recovery, and it set as priorities: tax evasion combating, change in the tax regime, privatization, closure of unprofitable state enterprises and lay-offs in the public sector. Reference is also made to the "complex, unequal social benefits", a "complete review" of which is required.

The Fund provides that the return to the markets with reasonable interest rates will be done "gradually", estimating that the funding needs of the country will amount to 164.5 billion euro in the period 2012-2014.

The International Monetary Fund said that the "deep recession" will continue also in 2012, stressing that "there will be stabilization" in 2013 and "weak cyclical recovery" over the years 2014-2017. It has also been noted that reforms in the labor market and high unemployment will cause considerable pressure on the wages as well as a decrease in prices. A primary surplus amounting to 4.5% of the GDP is expected in 2014, but it is also expected to decrease to 4% in 2020.

At the same time the need has been stressed to accelerate the necessary changes that will improve the competitiveness of the country, recalling the possibility for Greece to exit the eurozone in case it does not comply strictly with the loan agreement. The International Monetary Fund warned that a possible exiting of the country from the eurozone will increase the risk of spreading the crisis not only in the rest of the eurozone, but also internationally.

In its report, the Fund also noted the political risks associated with conducting the elections in Greece, which create greater uncertainty for the implementation of the country's commitments.

At the same time, new changes in the tax system will make Greek taxpayers "rejoice".

This year the following will be provided for: a reduction of the minimum taxable income to 5,000 euro, the elimination of the discount in the tax for people who have collected more than the necessary receipts, combined with a "punitive" tax for the absence of receipts, and "cuts" in the discounts for a number of costs - rental of housing, school fees, life insurance, social security contributions, interest on mortgages on the principal property of residences, medical examinations and treatment.

Thus, additional taxes which people with low-income will be required to pay add up to 900 euro annually, for taxpayers with one or two children up to 1,040 euro and for families with three or more children the amount adds up to 2,750 euro.

These amounts will have to be paid by the 15th of June when the deadline for the submission of tax returns for individuals for this year ends (sole proprietorships, individuals, professionals, farmers, hired people, etc.), whether submission of the form is done electronically or in person in the tax division.

The new Ε1 form includes 13 changes, one of the most important of which relates to code 205 Table 5, where taxpayers are invited to enter their lot number in the state electricity company or other supplier of energy to their primary homes, whether it is private, rental, or a donation.

This code will be entered voluntarily for information purposes only, but taxpayers should know that by writing it down the Ministry of Finance will be able to verify both the area of the premises referred to in the form Ε1 and Ε9, and the account of the person in the electricity company.

As mentioned non-taxable income is reduced from 12,000 to 5,000 euro, keeping in mind that for taxpayers under 30 years of age, pensioners aged over 65 and disabled people who have an annual income of up to 9000 euro, non-taxable income remains 9,000 euro.

Tags: International monetary fund report savings increased taxes
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