Greece Reform Proposals: June vs. July
Greek voters just rejected one set of bailout proposals. What's the difference this time around?
Here is a list of where the two proposals converge and where they still stand apart:
The government appears to backtrack on its own earlier proposals for military spending cuts, offering to reduce spending by 100 million euros in 2015 and 200 million euros in 2016. It had earlier suggested to cut military spending by 200 million euros in 2016 and 400 million euros in 2017. The creditors have sought an immediate cut in annual military spending by 400 million euros.
It offers instead to extend implementation of a luxury tax on recreational vessels in excess of five meters instead of in excess of 10 meters.
Financing and Debt
Greece is asking for three-year loans of at least 53.5 billion euros ($59.9 billion) to cover its financing needs between 2015 and 2018. It is also seeking debt restructuring and reprofiling of its long-term debt due after 2022. The earlier proposals were in return for a five-month extension of an existing bailout program for loans of as much 15.5 billion euros and didn’t involve any debt restructuring. Fiscal targets remain the same with primary budget surplus seen at 1, 2, 3, and 3.5 percent of the gross domestic product between 2015 and 2018, even amid signs that the economy may have deteriorated under capital controls and shuttered banks for nearly two weeks.Tax Reforms
With few exceptions, the Greek government adopts the creditors’ proposal on sales and corporate tax rates. The government is seeking to eliminate sales tax discounts on islands gradually by the end of 2016 instead of immediately, starting higher-income islands that are popular tourist destinations. It also seeks to keep hotels under a reduced 13 percent rate instead of the standard 23 percent.Pension Reforms
The government is in agreement with the creditors in eliminating early retirement benefits and envisages savings of 0.25-0.50 percent of GDP in 2015 and 1 percent of GDP in 2016, effective from July 1, in line with demands under the earlier proposals. It proposes implementing a “zero-deficit” clause for supplementary and lump-sum pension funds, adopted in 2012, from October instead of immediately. While it agrees to phase out a supplementary allowance for low pensions by the end of December 2019, it wants to start phasing-out these benefits from March 2016 instead of starting immediately.Fiscal and Structural Measures
Greece wants to increase advanced income tax payment on corporate income to 100 percent and gradually for individual businesses by the end of 2017, as part of steps to close loopholes for tax avoidance. It also proposes to eliminate preferential tax treatment for farmers by the end end of 2017. The creditors wanted these steps to be implemented by the end of 2016.The government appears to backtrack on its own earlier proposals for military spending cuts, offering to reduce spending by 100 million euros in 2015 and 200 million euros in 2016. It had earlier suggested to cut military spending by 200 million euros in 2016 and 400 million euros in 2017. The creditors have sought an immediate cut in annual military spending by 400 million euros.
It offers instead to extend implementation of a luxury tax on recreational vessels in excess of five meters instead of in excess of 10 meters.
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