Moving to quickly satisfy international lenders, the Greek Parliament has approved a series of unpopular tax hikes and reforms to increase government income, one of the main conditions to qualify for continued aid from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).
After debating long into the night, 162 of the 300 MP’s voted to approve the package put together by the wobbly coalition government led by Prime Minister Antonis Samaras, the New Democracy Conservative leader. Opponents condemned it as an assault on the country’s struggling middle class.
The bill comprises 24 changes, including reducing the number of tax brackets to three from eight with a new top rate of 42 percent for individuals who earn 42,000 euros or more a year. That comes as the government has been criticized by the Troika for failing to go after tax evaders and those with secret accounts in foreign banks, who may be offered amnesty and an 8 percent tax rate.
Other changes include cutting the corporate tax rate to 32.8 percent from 40 percent and imposing a 20 percent capital gains tax on Greek stocks from July 1. The changes place more of the payment obligation on businesses, especially the self- employed, reducing the burden on employees and pensioners by 100 million euros compared with 2012, Finance Minister Yiannis Stournaras said. The government hopes the measures will bring in about 2.5 billion euros ($3.3 billion) in additional revenue in 2013 and 2014.
Stournaras told lawmakers: “It is a bill of fiscal necessity and responsibility, required for us to get our next bailout tranche,” referring to continued loans from the Troika, some 52.5 billion euros ($69 billion) of which have started to be disbursed. “We are not in favor of taxes,” Deputy Finance Minister Giorgos Mavraganis said. “But in the current situation we must lead the country out of its impasse. Once we achieve stability we will proceed to cut taxes and simplify the system.”
The tax reform is part of an overall 13.5 billion euros ($17.45 billion) austerity package that Athens passed in November, 2012 to qualify for further bailout funds and avert bankruptcy. Critics accused the government of heaping unbearable burdens on ordinary Greeks while giving the rich an easy ride, with the main opposition Coalition of the Radical Left (SYRIZA) saying austerity has “demolished the country’s middle classes.”
“This is a bill that puts into action a plan of destitution. Seven hundred thousand Greeks can’t pay their electricity bills, there are three million poor people in our country and 57% of our youth is unemployed,” said Panos Kammenos, head of the anti-bailout Independent Greeks party. Stournaras promised to return with a bill to go after tax cheats, possibly including mandatory jail time instead of suspended sentences, which is all the law allows now.