The latest Greek proposal which was discussed in Brussels on Monday evening includes nearly 8 billion euros worth of measures – 2.692 billion euros for 2015 and 5.207 billion euros for 2016. The proposal that was submitted includes a 1% primary surplus goal for 2015 and 2% goal for 2016.
In its latest proposal, the government will gradually begin to restrict early pensions as of 2016, with the intent of phasing them out by 2025, without however affecting special categories [hard manual labor, disabled etc]. The zero-deficit clause in pensions, which would cause 500 million euros worth of cuts, will not be implemented.
The VAT reform, which will involved three rates (23%, 13% and 6%) will come into effect in July and is meant to generate 680 million euros (0.38% GDP) in 2015 and a further 1.36 billion euros (0.74%) in 2016. The government wants the low 6% rate for medicine and books, the 13% rate for energy, food and water and the 23% for everything else.
About 1.8 billion euros worth of measures will be implemented in the pensions system, about 0.37% of GDP for 2015 and 1.05% GDP for 2016. This includes restrictions on early retirements (60 million euros in 2015 and 300 million euros in 2016), increasing IKA pension contributions by 3.9% (350 million euros in 2015 and 800 million euros in 2016) and contributions for supplementary pensions from 3% to 3.5% (120 million euros in 2015 and 250 million euros in 2016). Contributions will also be raised for pensioner healthcare, from 4% to 5% for main pensions (135 million euros in 2015 and 270 million euros in 2015) and from 0% to 5% for supplementary pensions (240 million euros in 2016).
Corporate and income taxes are expected to generate income to the tune of 0.66% GDP for 2015 and 0.58% GDP for 2016. Specifically, businesses with profits over 500,000 euros will face a 12% special tax, which will yield 945 million euros in 2015 and 405 million euros in 2016. As of 2016 the corporate tax will increase from 26% today to 29%, thus generating 410 million euros worth, while the solidarity tax hike is expected to yield 220 million euros in 2015 and 250 million euros in 2016.
Further measures, worth 0.5% GDP in 2016, include cuts in defense (200 million euros, taxing television advertising (100 million in 2015 and 2016), raising the luxury and private yacht tax (47 million euros in 2015 and 2016), VLTs, e-gambling (35 million euros in 2015 and 225 million euros in 2016) and taxing mobile phone licenses (for 4G and 5G networks) will generate 350 million euros in 2016.
According to a government non-paper the proposal is not a part of its program, but rather the result of hard and painful negotiations that aimed to reach an agreement that will not affect worker rights or social cohesion and has the prospect of growth. The government also notes that it provides a sustainable solution for the economy without burdening small and medium incomes.
