While there is some convergence on certain issues, such as VAT targets and corporate taxation, there are still significant hurdles that need to be overcome in order for Greece and its partners to reach an agreement.
In its latest proposal Greece has raised its VAT revenue target from 0.74% GDP to 0.93% GDP, with the institutions demanding a 1% GDP target. Greece insists of preserving a 13% VAT rate for food, water and energy and a low 6% VAT rate for medicine and books. It has also decided to maintain the 30% VAT discount for the islands.
While Greece has accepted, in part, the institutions’ recommendation on the tonnage tax in shipping, it rejects the abolition of tax cuts exemptions and proposes the implementation of a more efficient taxation framework for commercial shipping.
Greece has also made some concessions on pension expenditure, but wants a more gradual phasing out of early retirements by 2022. The creditors demand that the healthcare contributions of pensions must increase from 4% to 6%, while the Greek side suggests a 5% rate instead.
The latest Greek proposal also includes a provision for reducing the national defense budget by 200 million euros, with the creditors demanding 400 million euros worth of cuts.
Finally, the Greek side has pledged to announce deadlines for the privatization of OLP and OLTH by the end of October 2015, as well as carrying out what is necessary to complete the privatizations of regional airports, TRAINOSE, the Egnatia Odos highway, OLP, OLTH and the Elliniko development.
The Greek proposal | The creditor proposal
