Back to drawing board for budget
Covid-19 crisis is forcing the redrafting of fiscal policy, with tax breaks pushed aside for now
The coronavirus epidemic is likely to infect the budget and the tax breaks planned for this year concerning the Single Property Tax (ENFIA) and the solidarity levy.
The government appears to be putting aside its plans for the further reduction of ENFIA and the gradual abolition of the solidarity levy for now due to the consequences of the virus on the economy.
The Finance Ministry is planning ahead and it appears certain the government will seek the adjustment of the fiscal targets on two levels: The first concerns the exemption of expenditure related to migration and the effects of the coronavirus from the calculation of the primary surplus, and the second regards the reduction of the primary surplus target to below 3.5 percent of gross domestic product.
Deputy Finance Minister Theodoros Skylakakis told Skai that an adjustment is required for the primary surplus, with the exclusion of spending related to the Covid-19 outbreak: “We are not saying we will not make the fiscal targets, but we are asking for the same treatment as the other countries; the 3.5 percent will have to be adapted, the chances are very big,” he said.
Skylakakis referred to the plans for tax reductions the government has announced, saying: “We should first overcome this crisis; we have a meteorite coming toward us. We should first see the extent of the phenomenon, as without seeing the light at the end of the tunnel, we cannot measure its length.”
The announcements concerning an 8 percent reduction to ENFIA this year and the easing of the solidarity levy – with the government targeting a 30 percent reduction in 2020 – are now likely to be postponed.
There may also be changes to the tax measures already voted on and introduced since the start of the year. Ministry sources say the drop in consumption may well lead to a reduction in card transaction requirements (that come to 30 percent of the annual income).
Another measure that has been thrown into doubt is the planned reduction of the social security contributions. The target of the government has been for contributions to be reduced this year by 2 percentage points, up from the 0.9 percentage points that the year’s budget provides for.