Greece to Propose Lowering Tax-Free Threshold to Avoid Pension Cuts

Thursday, February 2nd, 2017
Last Update: 19:03

Greece is to lower the tax-free threshold for low incomes in order to close the evaluation of the bailout program, a Kathimerini report says.

The proposal for lowering the tax-free threshold to incomes of 6,000 euros per year and above is so that the Greek government avoids further pension cuts to reach the fiscal targets required by creditors. Athens is to propose that pension cuts be part of the contingency measures, otherwise known as “the cutter.”

According to Kathimerini, in a Wednesday teleconference between Deputy Finance Minister Giorgos Chouliarakis and lenders, there were more measures required, such as the immediate concession of 17% of the Public Power Company and transfer of management.

The proposal for the limit of 6,000 euros for tax-exempt incomes is to apply for 2018, without excluding the possibility of applying this year. The measure is expected to bring about 2.6 billion euros, closer to the International Monetary Fund requirements of 4.5 billion euros to reach the 3.5% primary surplus target.

However, the IMF has called for cuts in pensions, and particularly the abolition of the personal difference. The Greek government is avoiding the measure in fear of creating social turbulence.

Under the circumstances, pension cuts pass to the fiscal contingency mechanism (the cutter). If there are deviations from fiscal targets in the 2018 budget, then pensions will be slashed automatically.

The government aims at closing the evaluation by the February 20 Eurogroup, so the final agreement with creditors is signed by early March.

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