ATHENS, July 14, 2019 (BSS/AFP) – “Once my taxes are paid, at the end of
the day I have 20 or 25 euros left in my pocket,” lamented Greek hairdresser
Babis Toumbanos.
Like him, there are many entrepreneurs in the country who want the new
conservative government that emerged from the July 7 general election to
relieve the heavy tax burden of recent years.
Incoming Prime Minister Kyriakos Mitsotakis inherits an economy saddled
with taxes applied in the last decade — including a previous government
which he was part of — to refloat the country’s public finances in the
middle of the debt crisis.
Mitsotakis has promised a “rebirth of the middle class”, which was
squeezed by increases in VAT and income taxes, as well as the imposition
during the crisis of a new heavy tax on real estate.
The conservative leader announced that at the end of July his government
will present a bill to lower these taxes, as well as the corporate tax rate
from the current 28 percent to 20 percent.
Tax relief has been a mantra for Greek small and medium-sized businesses
for years.
“For all Greek companies, during these years, the problem has been taxes,”
said Elena Kouretsi, sales manager at Vitamin Bar, a company that patents
juicers in a dozen countries.
“Even if you have work, production and sales, in the end eighty percent of
your income is gone,” said the 35-year-old businesswoman, adding that she is
hopeful that the new government will show “understanding” to
entrepreneurship.
– ‘The problems are immense’ –
Vasilis Maselos, president of the Greek ready-to-wear association (SEPEE),
said he believes that Mitsotakis “has promised reasonable things”.
However, he warned that “the problems are immense”, starting with a
technologically backward government administration.
This businessman, who sells swimsuits and nightgowns in Japan, said the
volume of business in textiles is 50 percent below the level in 2008, before
the global and Greece’s own economic crisis struck.
“People only buy what is essential, and sometimes not even that,” he said.
State statistics put Greeks’ purchasing power at one-third lower than the
EU average.
But “if we grow three or four percent per year — compared to 2.1 percent
projected this year by the European Commission — in five or six years can
recover much of the lost ground,” he added.
It is a hope shared by civil engineer Kostas Kyriazis, still active at 68
years old. During the crisis, his small office lost up to 60 percent of its
revenue.
But since the end of 2018, they have observed “a small growth”, mostly
from renovations and apartment refurbishments linked to Airbnb rentals.
“There are many opportunities in Greece,” particularly in tourism, he told
AFP.
– Slow recovery in incomes –
Panayotis Petrakis, professor of finance at the University of Athens,
calculates Greece will not return to pre-crisis prosperity levels until 2025.
Available income “has been rising very slowly for two years, at a rate of
about 150 euros per head. It will continue to rise, the question is at what
speed,” Petrakis told AFP.
Public dissatisfaction at the slow recovery in incomes means there is
widespread support for reducing taxes, but such a move also poses risks for
new PM Mitsotakis.
While cutting taxes, he also needs to lower Greece’s public debt,
currently the highest in the EU at 180 percent of gross domestic product.
He must also satisfy the demands of the country’s watchful European
creditors to maintain sound finances: running a primary fiscal surplus (that
is, excluding debt interest repayments) of 3.5 percent of GDP until 2022.
Greece also has a major problem with its banks, whose bad loans are at
record European levels.
This “continues to weigh on the performance of Greek banks, and limits
their ability to lend to non-financial companies and households,” the
Canadian rating agency DBRS warned this week.