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Slightly to the right, Kuropatkin ...

25 September 2015 / 21:09:06  GRReporter
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"On Saturday, they swear at you, on Sunday they vote for you and on Monday they ‘cut their hand’", Konstantinos Karamanlis used to say. That happened in another time, when Greek society was poorer and had not much to lose. Now, however, there is much more to risk. This is how journalist Kostas Stoupas begins his analysis.

Alexis Tsipras was born under a lucky star in politics. Within nine months, he won the elections twice, with two totally opposing slogans at that. The weak link for Tsipras is the economy however. The estimates for the economy and unemployment consequently, the revenue and social security contributions continue to deteriorate. The more we are drifting away from the month of August, the faster the situation is deteriorating, which was the reason for the early elections. It is very likely that there will be problems by Christmas with the targets set for public revenues and social security contributions.

The first steps of the Tsipras government include the statements for raising taxes and social security contributions, to avoid cuts in supplementary pensions. These measures, combined with the deterioration of the psychological climate that they entail, are accelerating the collapse in revenue.  It is obvious that the government did not understand, and still does not understand, what is happening in the economy or what will follow. Indeed, the early elections have provided Alexis Tsipras with a more homogeneous group and parliamentary majority that is however very "fragile" - it consists of only 155 deputies in the 300-member parliament.

If it becomes impossible to pay salaries and pensions in the coming months, this will shake the foundations of the parliamentary majority because its members blindly believe that a stork brings pensions and salaries at the end of the month. Out of necessity, and to avoid another round of early elections and the collapse of the country, steps will be taken to form wider government coalitions. Instead of increasing taxes and social security contributions in a period of a mass withdrawal of businesses from the country (I have learnt that even greenhouses have loaded the equipment to move to Bulgaria), radical measures in exactly the opposite direction are required.

Before the drastic reduction of taxes, we must have a stable tax framework so that we are competitive with our neighbours who are "stealing" our companies and the rich countries that are "stealing" our qualified staff. Here are some ideas that I have outlined for, and proposed to, various politicians and political movements, which they have wanted from me over the course of time:

Reducing tax legislation - instead of thousands of pages of conflicting laws, there should be only a few pages of laws, but with no "loopholes" in them. Amending the main tax legislation not by a simple majority in parliament but by a majority of 2/3. In this way, we would not have 5 tax laws per year and every government would be trying to get closer to the positions of the opposition.

Introducing automatic reduction of specific costs whenever the budget deviates from the targets set due to the current situation. A solution in the middle would be to reduce costs by 2/3 and increase taxes by 1/3 every time a deficit is possible.

Creating from scratch a tax collection mechanism, on the model of the general secretariat of public revenue. If these conditions existed, private businesses and entrepreneurs would be able to plan their activities in the long term, even for periods in which the economy might encounter problems. They would know what the greatest burden would be in cases of emergency.

Facilitating the opening of new businesses, not only their registration in the tax office. Creating a network of services, including service centres for citizens (they could be private) which, in cooperation with the relevant departments, would provide and issue all the necessary documents and certificates in terms of urban planning, taxes, health, etc.

Facilitating the closure of companies. Cancelling all tax and social security obligations that were not detected or settled three months after the application to suspend the activity of the company. (Some time ago, I had a publishing house. I closed it and 10 years later, the National Insurance Institute informed me that it should check the contributions of employees... Fortunately, no outstanding obligations were detected for if there were such, the amounts and the interest due would be huge. Just because of this, I will never again dare to hire someone to work).

Introducing a flat tax, with the same rate for companies and individuals. The existence of low taxes for businesses and higher ones for workers is social injustice. Companies do not consist only of shareholders but above all of their management and employees.

In tax policy, we must take into account that we do not compete with Germany, which has a production and business infrastructure, and with Bulgaria and Romania. We need to investigate the incentives and compete with them. We compete with Germany and rich countries to attract managerial staff. There could be two, at most three tax scales, 10-15-20% for companies, depending on the incentives that we want to give. High added value companies could be taxed at a lower rate.

They could pay no taxes the first five years, pay at a lower rate over the next five years and then be taxed at a constant rate that could not be changed without being announced 5-10 years earlier.

Introducing 2-3 tax scales for workers, the highest being for incomes of over 100,000-150,000 euro. Attracting managerial staff is essential for attracting investment. In modern companies, the management decides where to invest to create subsidiaries. It is logical that they include in the criteria their personal interests and aspirations.

With an economic policy based on these basic principles, unemployment would return to normal levels within five years and the basic salary would double within 10 years. The only way to stay in the euro area as a full member is to achieve a competitive economy, not to beg for subsidies. Economy has iron laws and if the parliamentary majority does not apply them within the euro someone else will apply them under other conditions.

Therefore, go "Slightly to the right, Kuropatkin"* and let journalists not be required to advise politicians what to do, only to discover contradictions and subject them to criticism.

*The expression "Slightly to the right, Kuropatkin..." is the title of an article in an Athens newspaper from the early 20th century. During the Russo-Japanese War (1904-1905), with this title Russian the newspaper advised General Kuropatkin to move to the right to surround the Japanese. The Russian did not listen to the advice and was defeated...


Tags: AnalysisGreeceEconomicsEarly electionsAlexis Tsipras
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