A reduction in the unpopular property tax (ENFIA), by 209 million euros annually, and cuts in certain tax rates for taxpayers and businesses alike are expected to be the main pledges - with an eye to 2019 general elections - announced by Greek Prime Minister Alexis Tsipras over the weekend.
G. Kouros
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A reduction in the unpopular property tax (ENFIA), by 209 million euros annually, and cuts in certain tax rates for taxpayers and businesses alike are expected to be the main pledges - with an eye to 2019 general elections - announced by Greek Prime Minister Alexis Tsipras over the weekend.
Changes to another highly unpopular income tax, dubbed a "solidarity contribution" by the mostly hard left government for taxpayers earning annual income over a certain figure in the low five digits bracket, may also be announced, along with the complete abolition, in two stages, of remaining capital controls.
The latter remain a leftover from the leftist-rightist Tsipras government's shambolic negotiations with creditors in the first half of 2015 and the snap declaration of a contentious referendum in early July 2015 on a withdrawn "last offer" the latter. Capital controls were imposed to prevent a "bank run" and a massive export of capital overseas.
Tsipras will take advantage of the opening of an annual trade fair in the northern city of Thessaloniki to make the unofficial but annual state-of-the-economy address given by Greek prime ministers. With sagging voter approval ratings and his SYRIZA party trailing a center-right rival by double-digit percentage points in practically all opinion polls for a year and a half, Tsipras' first post-bailout address at the Thessaloniki International Fair (TIF) will attract more attention than previous such appearances.
At the same time, obligations towards institutional creditors from three successive memorandums remain standing, an "enhanced supervision" regime now in place means creditors' auditors will be in Athens to compile reviews on a quarterly basis, whereas this week witnessed a worrying jump in spreads for Greek 10-year bonds. As such, any indication - even in the form of ubiquitous and hazy pre-election promises - of a return to more spendthrift ways by a Greek government will negatively affect markets' view of the country's creditworthiness.
Finance ministry officials in Athens have reportedly calculated all possible costs from whatever spending hikes and tax cuts are announced, to ensure that no "fiscal divergences" arise. Moreover, Tsipras and his slim majority coalition must avoid decisions that could be considered as "unilateral actions" by creditors, especially European and Eurozone institutions (Commission, ECB, ESM).
One proposal that timidly surfaced this week is to suspend a lowering of the tax-free annual income threshold for taxpayers, which is set for 2020, another austerity measure previously agreed to with creditors.
Over the recent period, however, various ministers and government officials repeatedly went on record as saying a different austerity measure set for Jan. 1, 2019, namely, another round of pension cuts, should be avoided. The reasoning is that primary budget surplus targets, as a percentage of annual GDP, are not only being met, but are being surpassed. Creditors have countered that the social security spending cuts are a structural reform, not a fiscal action.
On its part, heading into an election year with another reduction applied to social security spending is something that the Tsipras government wants to desperately avoid.
Tsipras himself arrived earlier in the city late on Thursday night, instead of a previously announced arrival on Friday morning.