Another round of tax hikes and spending cuts, lumped together, are projected to reach 2.3 billion euros for 2017, according to information released ahead of the submission of the 2017 draft budget, which the leftist Greek government will submit to Parliament early next week.
Moreover, the embattled Tsipras government will officially base next year’s budget execution on an ambitious 2.7 percent forecast for GDP growth over the entire year, and also prescribe a memorandum-mandated target of a 1.75-percent primary budget surplus as a percentage of GDP.
Forecasting GDP growth of 2.7 percent, on an annual basis, and then pegging the higher GDP figure with the fiscal target of 1.75 percent means
generating an eyebrow-raising surplus of 3.2 billion euros, significantly up from this year’s 900 million euros. A very modest 0.5-percent primary budget surplus goal for 2016 is the figure agreed to between Athens and its creditors.
The difference between this year’s 900 million euros in primary budget surplus from the projected 2017 target, in absolute terms, namely, 3.2 billion euros, is the reason why the government will again raise certain taxes and cut spending.
In terms of the latter, specific cuts in the overall budget outlay for social security is expected to be the “reservoir” for trimming the budget, with a monthly bonus (EKAS) paid in previous years to low-income pensioners gradually being phased out.
Higher taxes from income generated from property leasing is also envisioned, along with the ubiquitous hikes in indirect taxes and a recalculation, upwards, of a so-called “solidarity tax”.
Most SMEs in the crisis-battered country will also see higher taxes on profits, while the target is also for higher revenues from personal income taxes, but without increasing rates.