UPDATE 3-Greece unveils capital gains tax to curb deficit

(Adds link to factbox of tax neasures)

By Lefteris Papadimas

ATHENS Aug 27 (Reuters) - Greece unveiled a 10 percent tax on capital gains and dividends on Wednesday as part of a package to boost budget revenues, but economists questioned whether it would be enough to compensate for an economic slowdown.

Finance Minister George Alogoskoufis announced the capital gains and dividends tax, which will take effect from Jan. 1, along with other measures to help Athens meet its 1.6 percent public deficit target this year despite flagging revenues.

The conservative New Democracy government had won plaudits from Brussels for slashing its budget deficit to 2.8 percent of gross domestic product last year -- ending three years on the European Union's blacklist.

Its latest measures -- which include higher taxes on the self-employed and on car license plates, and incentives for the payment of outstanding taxes -- may put the government on a collision course with unions, which are already threatening protests over economic reforms and high inflation.

"The international financial crisis and the rise in global inflation has been affecting growth and inflation in Greece for about a year," Alogoskoufis told a news conference.

He said expenditure was being pushed up by higher interest on the public debt -- equivalent to 93 percent of GDP -- while many Greeks were unable to pay taxes as the economy cooled.

"This will help us widen the tax base and stamp down on tax evasion," he said, without specifying how much additional revenue would be raised.

GDP growth, amongst the euro zone's highest, slipped to 3.4 percent in the second quarter, below a government target of 3.6 percent for 2008. The inflation rate is at a 10-year high.

CORPORATE TAX CUT

In an effort to stimulate investment, Greece will gradually reduce the corporate tax rate to 20 percent by 2014 from the current 25 percent, Alogoskoufis said.

Analysts say that Greece's corporate tax rates have made it less attractive to investors than some neighbouring Balkan countries, where labour costs are also lower.

Economists estimate Greece would need more than 1 billion euros ($1.47 billion) this year to plug a shortfall in revenues and many questioned whether the measures would be enough.

"The economic slowdown makes this year's revenue targets unattainable," said Nicholas Magginas, an analyst at National Bank. "It would be a success if the Greek government can manage to keep the deficit below the 3 percent (EU) ceiling this year." Magginas said those measures that would take effect immediately -- such as higher tax on the self-employed -- had been announced too late to have a significant impact this year.

Re-elected with a narrow two-seat majority in September, the government has faced union opposition to its liberal agenda.

Unions have said they will stage a protest when Prime Minister Costas Karamanlis makes his annual economic policy address in the northern city of Thessaloniki on Sept 6.

With the Athens stock market's General Index .ATG already down by around one-third so far this year and trading volumes diminished, brokers also questioned how much revenue the taxes on securities would raise.

"It's a negative measure for the market but the market had already factored it in," said Takis Zamanis, senior trader at Beta Securities. "It will affect more the short-term players and domestic investors."

For a factbox on the tax measures, click on [ID:nLR187592]

(Writing by Daniel Flynn; Editing by Victoria Main and Swaha Pattanaik)