Two criteria for early tax discount cut
Following International Monetary Fund spokesman Gerry Rice’s statements on Thursday, eurozone sources believe the IMF will insist on bringing the reduction of the income tax discount forward to January 2019.
These sources argue that the factors that will determine the final decision of the IMF are the growth rate of the first quarter of this year, which will be reported in early June, and budget revenues. On both fronts there are causes for concern, they note.
The weakening of the growth rate in 2017, when it ended up at 1.4 percent – almost half of the original estimate – points to a similar downward revision for this year too.
The government has already made its first adjustment to its 2018 forecast from 2.5 percent to 2.3 percent, while other entities speak of a rate of around 2 percent.
As for tax revenues, the same eurozone sources point out that taxpaying fatigue has been recorded and that this has a negative effect on projections for this year and next.
By June, when the growth data are released, a sufficient volume of figures will have been gathered for a clear picture of tax revenues too, although the tax fatigue was already obvious last year: In 2017 tax takings recorded a shortfall of 1.3 billion euros compared to the original target, which was later covered by the overperformance of Single Social Security Entity (EFKA) revenues and the curtailing of expenditure.
The government will likely respond by producing the final fiscal data for 2017, showing an excessive primary surplus for a second straight year, as evidence there is no reason to bring forward the reduction of the tax-free threshold. Those figures were yesterday forwarded by the Hellenic Statistical Authority (ELSTAT) to Eurostat for the latter to formally announce them, along with those of the other member-states, on April 23.
According to a government source, as well as the recent estimate of the Fiscal Council, the primary surplus exceeded 3.5 percent of gross domestic product in 2017, against a target for 1.75 percent in the bailout program.
