Galery

1

Political instability and the fear of tomorrow among taxpayers leads to shrinking revenues to the Greek budget. According to the Ministry of Finance, this is due to dwindling numbers of tax authority and insurance fund payers wishing to participate in the deferred 100 increment payment, to the reduced revenues from property taxes, as well as to the aborted settlement of insurance funds obligations.

Citizens expect to see how political events will unfold as the two major parties’ views on taxation are in stark opposition to one another. SYRIZA says it will cancel the single-rate property tax, and there will be exemptions on overdue loans. New Democracy, in turn, acknowledges the difficulties facing some groups in the population, but apart from some limited measures (such as the 100 increments one) avoids the topic.

Reduced budget revenues affect negotiations with Greece's creditors as well, as they translate in swelling financial deficit. The future economic leadership of the country will not only have to take new measures but also pay salaries, pensions and running costs. Besides, this will have to be done in the absence of a new tranche from creditors.

Seven outstanding problems

1. Single-rate property tax on real estate

According to existing provisions, it has to be paid in six-month instalments. The deadline for the final 2015 payment will not be clear until the new government is in place. It is not known either whether the rates will be lowered for those who own vacant or non-electrified properties, as the government promised. The government should collect € 3.2 billion in the form of property taxes. But the authorities in Greece already have a tradition of shying away from sending tax payment notices out to citizens in election periods. Something of the sort happened in 2012, and as a result property owners ended up paying tax for a total of three years.

SYRIZA has proposed to get rid of the single property tax rate and restore large property rates.

2. VAT

Whether rate increases for hotels will materialise is anybody's guess. This measure was promised to the troika by Minister of Finance Gikas Hardouvelis, and was designed to reduce the 2015 financial deficit.

3. Excise duty

The current government has promised the troika to ramp up excise duties on cigarettes, and introduce a luxury tax. Which is yet another measure that no one knows when and if it will be implemented.

4. The islands

The troika demanded the cancellation of the 30% VAT reductions, which apply for the Aegean islands and Crete. Reduced rates amounted to 5%, 9% and 16%. If cancelled, they will be replaced by 6.5%, 13% and 23%, respectively, which apply across the country.

5. Tax exemptions

The troika insists on the cancellation of more than 700 reasons for exemptions, which apply to household and business taxation, property transfers, inheritances, donations from parents, VAT, car taxes and excise duties. They cost the budget € 3.614 billion in total.

6. Tax returns

Tax returns are expected to change for most taxpayers this year, including registered farmers, workers employed on full-time and provisional contracts at the same time, and receivers of rental income. Individuals’ tax returns will be submitted by June 30th. The tax will be paid in 3 bimonthly instalments, with the first one being paid in late July.

7. Settlement of arrears

Until 31 March 2015, debtors to the state may use the opportunity to settle their arrears by means of the 100 instalments scheme. Thereafter, they will have to settle their obligations in 12 instalments.

Political uncertainty makes debtors to the state wait until a new government takes over. According to the Ministry of Finance, only 160,000 debtors have lodged applications for payment in 100 instalments, and the estimated amount coming in from the scheme is € 1.6 billion. About 135,000 of them have already put in about € 100 million.

Most debtors prefer to pay in 12 or 24 instalments.

Fresh short-term debt from the period January-November 2014 amounted to € 12.5 billion. This shows the inability of taxpayers to meet their obligations.