Greek Finance Minister Presents Wage, Tax Reform Measures

Greece's finance minister announced the main thrust of the government's new public sector wage policy and tax reform, aimed at reducing the country's huge budget deficit and tackling an ailing national economy which has spread concerns across Europe.

Starting from the prime minister, ministers and top officials in the public sector, there will be a freeze on wages in 2010 and cuts of up to 10 percent in allowances, Finance Minister George Papaconstantinou said.

Most public sector employees will see their incomes reduced by 1 to 5.5 percent, while managers of state-controlled companies will not receive bonuses this year.

With the exception of the sectors of health, education and security, there will be no hiring of new employees in public services this year.

Regarding the draft tax bill which is still under consideration and will be sent to parliament for a vote in March, the minister stressed that the main target is to fight widespread tax evasion and achieve a balanced sharing of burdens between low income earners and tax payers with high incomes.

According to the new income tax scale, no tax will be levied on citizens declaring an income of less than 12,000 euros per year. And above this limit, annual incomes will be taxed at different percentages, ranging from 18 percent for medium income earners to 40 percent for those earning more than 60,000 euros annually.

Large real estate owners, including the Greek Orthodox Church, with properties worth more than 400,000 euros, will be asked to pay an increasing annual property tax.

In a measure to discourage businesses from trying to evade taxes, the government will offer tax cuts for the tax payers who collect receipts for goods and services they pay for.

Tax evaders will face fines or confiscation of assets, Papaconstantinou said.

Greece is struggling to tame a runaway public spending deficit equivalent to 12.7 percent of GDP last year, far exceeding the limit set by the European Union.