Greek coalition partners lock horns over tax reform bill

ATHENS Tue Dec 4, 2012 4:07pm GMT

Greece's Finance Minister Yannis Stournaras (R) speaks near Spain's Economy Minister Luis de Guindos (L) and Germany's Finance Minister Wolfgang Schaeuble during an euro zone finance ministers meeting at the European Union Council in Brussels December 3, 2012. REUTERS/Francois Lenoir

Greece's Finance Minister Yannis Stournaras (R) speaks near Spain's Economy Minister Luis de Guindos (L) and Germany's Finance Minister Wolfgang Schaeuble during an euro zone finance ministers meeting at the European Union Council in Brussels December 3, 2012.

Credit: Reuters/Francois Lenoir

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ATHENS (Reuters) - Greek Prime Minister Antonis Samaras struggled on Tuesday to bridge a rift in his ruling coalition over a tax bill long-demanded by the country's foreign lenders.

The European Union and International Monetary Fund have told Greece that it must simplify a tax administration seen as corrupt and ineffective before they can disburse about 9 billion euros (7 billion pounds) in aid early next year.

Greece is also under orders to increase revenue by closing tax loopholes and broadening the tax base to include notorious tax dodgers such as doctors, lawyers and the self-employed.

Samaras's coalition allies have threatened to block the deal in parliament, saying it would further strain honest taxpayers instead of cracking down on wealthy tax evaders.

The prime minister summoned Deputy Finance Minister George Mavraganis and other ministry officials for a second meeting in as many days after repeated failures to agree on who should be taxed more and by how much.

"We're starting from scratch," said Andreas Papadopoulos, spokesman of the Democratic Left, a junior partner in the coalition.

The new tax system must also generate about 1.1 billion euros of additional revenues from 2014, as part of a 13.5 billion euro austerity package that Greece passed last month to comply with the terms of its bailout.

According to leaks in the Greek press, the government plans measures such as applying the 45 percent top tax rate to incomes above 26,000 euros - from 100,000 euros currently - and abolishing tax credits for dependent children.

Greece's central bank said in a report on Monday that average citizens were already taxed excessively. According to Greece's statistics agency ELSTAT, taxes soared by 37 percent from last year.

The leaks, which the government has not denied, have deepened anger among a public worn down by five years of recession and repeated rounds of wage and pension cuts.

"You can be sure that the government, under very difficult circumstances, will do the best it can for the Greek people," Mavraganis told reporters after meeting Samaras.

Finance Minister Yannis Stournaras is expected to meet coalition party negotiators on Wednesday to discuss the bill before releasing it for public consultation.

Socialist leader Evangelos Venizelos said the bill was a litmus test for the six-month old government whose majority slid to 166 seats in the 300-strong assembly after it passed the austerity cuts.

"We mustn't make mistakes that will bring us face to face with Greek society," Venizelos said of the tax reform bill on Monday.

(Reporting by Karolina Tagaris and Harry Papachristou; Editing by Ruth Pitchford)

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