Greece introduces new property tax to plug €2bn budget shortfall


GREECE’S Socialist government is expected to announce the details of a new property tax today that it has said it must introduce to qualify for a sorely needed €8 billion loan tranche by plugging a €2 billion budget shortfall.

Announcing the new tax after an emergency cabinet meeting on Sunday morning, finance minister Evangelos Venizelos said his government had no option but to do “everything necessary” to cover the budget shortfall, following a deeper-than-expected recession.

Forecasting that the next two months would be “hellish” for the Greek people, Mr Venizelos said the revenue shortfalls threatened the country’s vital international bailout programme.

He added that, along with efforts announced last week to reduce the size of the country’s public sector, the new measures would boost lagging revenue by €2 billion, or about 1 per cent of annual gross domestic product.

According to figures released yesterday by his ministry, Greece’s state budget deficit totalled €18.1 billion for the first eight months of this year, already exceeding the annual target by a billion euro.

The new property tax will see property owners pay 50 cents to €10 per square metre according to the value of the property, with the total amount payable being calculated according to various social criteria such as the owner’s income and the size of his or her family.

On average, property owners can expect to pay €4 per square metre of built surface.

Sunday’s announcement of the new blanket property tax, which has been condemned vociferously by all of Greece’s opposition parties, has severely undermined the fragile credibility of prime minister George Papandreou, who, in a keynote address delivered on Saturday evening at the country’s major international trade fair in Thessaloniki, gave no indication that the new surtax was on its way.

In his speech, Mr Papandreou said that, in an effort to tackle unemployment, his government would soon begin distributing 100,000 hectares of land to young people who wanted to become farmers. He also pledged to boost investment in tourism and solar power development.

The fair was accompanied by extensive rioting on the streets of the northern port city, as some 25,000 people attended an anti-austerity protest.

The decision to raise the tax by adding it to household electricity bills – in effect, bypassing the Greece’s notoriously problematic revenue service in an effort to ensure compliance – drew an angry response yesterday from trade unionists at the state-run Public Power Corporation (PPC), who vowed that its members would not co-operate in cutting off the electricity accounts of property tax defaulters.

“We will under no circumstances allow the PPC to be used as a tax collection mechanism,” said Nikos Fotopoulos, president of the Genop union of power workers, once a bedrock of Mr Papandreou’s Pasok party.

Most of the country’s media has also dismissed the new surtax, with centre-left Ta Nea, traditionally supportive of Pasok, describing it as a “an offering to the troika”.

In an effort to defuse the anticipated anger at the new tax, Sunday’s emergency cabinet also announced that all elected or appointed state officials, from the country’s president down to 325 local mayors, would lose one month’s salary.

But the symbolic gesture is unlikely to quell the tide of public dissent, especially now that the Greek summer has come to an end with yesterday’s reopening of the country’s schools. Teachers and parents are already incensed that, owing to tendering and printing delays, the country’s 1.3 million schoolchildren and students will have to wait until early November at the earliest to receive their textbooks, which are provided free by the state.