Greece will present a new tax bill to eurozone finance ministers for approval on Thursday in a desperate effort to meet final conditions for receiving a much-delayed €34bn aid payment later this month.
The draft legislation was due to be approved by the Athens parliament in advance of the Eurogroup meeting in Brussels on Wednesday, but was delayed by political infighting by the three-party governing coalition and demands for fine-tuning by the “troika” of international lenders overseeing Greece’s economic reform programme.
A finance ministry official said the bill would go to parliament on Friday including “whatever last-minute additions and changes” were agreed with the European Commission and the IMF.
Premier Antonis Samaras’s decision to seek final approval for the bill from international lenders without consulting leaders of the two left-of-centre parties reflects a growing impatience with political foot-dragging over implementing reform.
Evangelos Venizelos, the socialist leader, and Fotis Kouvelis, leader of the Democratic Left, threatened to block the legislation on grounds it would increase the tax burden on salary earners while failing to crack down effectively on tax evasion by the self-employed.
The move also highlights the extent to which Greece has surrendered responsibility for fiscal and structural policy-making to its international creditors after missing budget deficit and privatisation targets set by a €174bn bailout programme.
Tax reforms are seen as critical to increasing budget revenues by at least €1.3bn annually and curbing evasion by doctors, lawyers and entertainers, considered among the worst offenders. About €30bn annually of tax revenues go uncollected, according to the Greek financial police.
The draft law proposes a simplified system abolishing most tax credits and setting up a three-tier system for personal taxation.
Annual incomes up to €25,000 for salaried workers would be taxed at 21 per cent, with the next €15,000 taxed at 36 per cent. Incomes over €40,000 would be taxed at 40 per cent. The law would also streamline tax arrangements for inheritances and transfers of capital.
Self-employed workers would pay tax of 26 per cent on incomes up to €50,000 and 32 per cent above that level.
While approving the measures in principle, the troika has called for changes to reduce the possibility of revenue slippage under the new system, along with a renewed commitment by the government to pass a second law overhauling the tax administration by mid-2013.
Greece received offers of €31.9bn in a debt buyback, the second condition for releasing the next aid payment, but still needs another €1.29bn of funding from the EU to purchase all the bonds tendered, the country’s debt management agency said on Wednesday. The deal, once completed, would reduce its debt burden by about €20bn.
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