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Embattled Greece to overhaul tax system

ATHENS, Greece - ATHENS, Greece (AP) — Greek Finance Minister George Papaconstantinou on Friday said the country's tax system will be overhauled by early March to broaden the tax base, boost revenues and fight tax evasion as part of efforts to pull Greece out of an economic crisis.

Athens is facing its worst debt crisis in decades and has come under intense European Union pressure to straighten out its finances and comply with deficit limits intended to support the shared euro currency.

The government announced a raft of measures this week to reduce Greece's mountain of public debt, which has reached euro300 billion ($440 billion) public debt, by 2012 and gradually bring the budget deficit — projected at 12.7 percent for 2009 — to below the European Union's euro-zone requirement of 3 percent of GDP by the end of 2013.

Papaconstantinou did not give any new details of the planned reforms and told a news conference that the government was aiming to introduce a new tax law in Parliament in early March.

"We all know the tax system was unfair and ineffective," Papaconstantinou said, but he cautioned that the full results of the tax reforms would not be seen until 2011.

"But for 2010 we predict an increase in revenues from certain aspects of the new law which are not negotiable, including inheritance tax," he said.

Greece's new Socialist government has resisted pressure to cut salaries and insists that revenues can be boosted by fighting widespread tax evasion and waste in the public sector.

According to the Finance Minister only 3,000 Greeks in a country with a population of 10 million population who claimed to have earned euro200,000 or more last year.

"It is clear that the incomes declared are out of step with the wealth that we see around us."

Markets so have reacted skeptically to Greece's recovery plan.

Ratings agencies Standard and Poor's and Fitch have both downgraded their assessment of the country's ability to pay back debt. Papaconstantinou said an ongoing assessment by Moody's Investor Services was expected to take several more weeks.

"There is a general attitude of wait-and-see toward our country," said Papaconstantinou who returned from visits this week to Britain, France and Germany.

"We had a very positive reception. (But) we did not turn everything around in three days. But it's up to the effectiveness of our policies and the reliability our country will gain by making commitments and sticking to them."

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