VAT tax increase and other “pressies” for real estate and cars

Homes are ruined by the new tax system, but a “window” opens to the mega-owners for completion – Changes in dividends, while a VAT/ taxes offsetting for businesses is being examined  

The government is counting on the extra revenue from completion and the wild tax hunt to avoid the worst of the economic and political “maypole” set around the debts and deficits of Greece between Athens and Brussels.

The economic team treats the revenue as a distraction from Troika pressure for the extension of the loan installments, to Giorgos Papandreou (meeting with Baroso and Strauss-Kahn in Brussels), Giorgos Papakonstantinou in Eurogroup and Louka Katseli (metting Troika tough guy Servaas Deroose, also in Brussels).
 
A “raid” for 1,5bil. euro within the year

Meanwhile in Athens, a wide meeting is taking place at the office of vice minister of Finance Dimitris Kouselas between revenue chiefs. The aim is an extra 1,5bil euro for the government within December, to close the 2010 “black hole” and negotiate  the 2011 measures with better terms .

Top pf the list is tax evasion and the revenue from completion since, according to sources, “a window is open” for those real estate owners who have been excluded so far.

The idea that the exclusion from completion of all those with real estate worth over 400,000 and under Property Tax should be abolished, is gaining ground in the economic team. This way the state can receive up to 450mil euro from 150,000 traders.
 
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POMIDA and the commercial world are strongly opposed. Their president, Stratos Paradias, considers this exemption “anti-constitutional” since, as stressed by the ESEE tax advisor Dimitris Lentzas “it is absurd to equate  someone with one or two properties possibly paid by a loan with a presumption of tax evasion, while at the same time some people with millions in OC and LTD are able to enter the regulation.”

Still, the final regulations of the new tax system are on the table:

    * Increase of low rate from 11% to 13%, which would pull the minimum rate to 6.5% from 5.5%. The adjustment of rates will come in January 2011. This will lead to an increase of food prices, electricity, water and gas bills, boat, airplane and train tickets, show admissions and taxi fares. On the other hand, the tax rates of medicines and tourist accommodations are reduced to 6,5%.
    * Increase of prices for tobacco products (cigarettes by 0,10 to 0,20 euros per pack, but also an increase in the profit margin for the kiosk owners). Specifically, the fixed tax will increase from 10% to 20% and the special tobacco tax will decrease from 67% to 65% to the advantage of the kiosk owners.
    * Relief of income tax for the purchase of the primary residence to stimulate the construction industry. Its implementation for primary residence purchase of 120sq/m and up to 200,000 euros is suspended for two years. However, with the latest regulation, 3842/2010, it is anticipated that from 1-1-2010 all household expenditure for the repayment of primary residence mortgage and from 23-4-2010 all costs for the purchase or construction of a primary residence are now considered evidence of acquisition of assets, and are taken into account in determining the imputed income of the taxpayers.
    * Reduction in vehicle registration fees, lower corporate tax rates and reduction of VAT on tourist accommodation. According to reports, the predominant scenario considered is the reduction in registration fees by 50% for private cars up to 1,600cc.
    * Reduction in corporate tax rates (OC and LTD). The rate on retained earnings will be reduced from 24% to 20% from 01.01.2011.
    * The increase of gained tax on the stock market is postponed. Tax on stock transactions will be imposed, as is already the case.
    * Reduction or elimination of TV advertising tax of 20%.

Tax change for dividends

    * Tax reduction on dividends. The order of the retained earnings will change, at least for the subsidiaries of multinational companies, although it’s could be applied to all other businesses also. They will not be taxed at 40% because of the competition with other EU countries (Bulgaria, Cyprus, etc.).
    * Faster limitation in favor of the State for unpaid dividends. It is discussed that the state should receive all dividends not claimed by the beneficiaries after 3 years rather than five (since the 40s). The economic team is looking at 10mil euro revenue per year. They are "betting" on the fact that part of the approximately 1.5 to 2bil euros is distributed annually by companies to their shareholders and are not received, because due to the crisis the amounts are very small and leave even the small shareholders indifferent. There is, however, the reverse phenomenon, with companies in the stock market distributing more dividends than in previous years becoming more attractive in conditions of depression and obsolescence of stocks, yet with the major shareholders not wanting to receive the dividends (which, to them, seem like small change…).
    * Reduction or exemption from the onerous 15% tax imposed by the Government to the properties of offshore companies, compared to 3% until this year. It is a retrograde step that was dictated by the fact that behind the offshore companies are not just locals fraudsters, but also many foreigners or Greeks living abroad who have invested their capital in real estate in our country and due to the high tax rates, they inform the government that they will sell and leave, as within a period of 6-7 years they are required to pay more in taxes than their overall investment!
    * Rate reduction or exemption from excise tax on yachts, in cases where vessels are moored permanently in our country, but their owners do not use them because they live abroad. Most of the time they employ their own staff for the maintenance of the vessel, resulting in excessive charges that make them send it or even sell it abroad.
    * Elimination of 100 tax offices all over Greece. These are minor offices (2nd class DOY) located all around the country.

The ministry of Finance is looking into a regulation for the offsetting of debts of companies obligated to pay VAT for money not yet received.