The government has prepared a reform proposal that includes measures worth 10 to 12 billion euros, with many of the reforms geared towards increasing State revenue, while aiming to attract investments to encourage employment and growth. This proposal, which was revealed in the Naftemporiki newspaper, will be presented to Greece’s creditors by Friday.
Additionally, the Greek proposal includes a series of significant changes to the country’s taxation and pension systems, in an effort to convince the institutions of the government’s turn to a more realistic approach and commitment towards rebuilding trust. The new proposal, it was reported, is based on the recent 47-page text and Juncker proposal.
In the new proposal there will be a three-tiered VAT system, with medicine, books and theatre tickets at 6%; hotels, energy, fresh produce and essential food items at 13% and processed food, restaurants and most other items at a high 23%. In this proposal the 30% discount on VAT rates, a red line for the government in the ongoing negotiations, will remain in place.
The VAT increase in food will mean that prices may effectively increase by 8.85% immediately, as businesses will be unable to absorb the difference and maintain their prices. Similarly, hotel prices may increase by 6.1%, as low 6.5% VAT currently applies.
Furthermore, the government will maintain the controversial ENFIA tax on real estate in 2015 and 2016, while increasing efforts to combat tax evasion. The country’s tax administration will become an independent body, while stricter criteria will be introduced to declare oneself as a farmer. The solidarity tax, luxury tax and corporate tax are also set to increase.
Regarding the reforms planned in the pension system, it appears that the government is to fully implement the Loverdos-Koutroumanis law, which provides a basic and proportionate pension for anyone who is entitled to a pension as of January 2015. In exchange the government will insist upon postponing the implementation of the ‘zero deficit clause’ in supplementary pensions. The new pension system will also aim to discourage early retirement by introducing stricter penalties.
The government’s proposal also includes the implementation of the OECD toolkit, which includes opening closed professions, creating one-stop-shops, reviewing competitiveness in areas characterized by oligopolitistic practices and adopting new strategies to combat corporate corruption, particularly in relation to public contract procedures.
