May 31, 2011 / 7:03 AM / 7 years ago

Greece, troika agree on lower VAT tax- papers

ATHENS, May 31 (Reuters) - Greece and a team of EU, IMF and ECB inspectors reviewing the country’s economy have agreed on a value-added tax cut to help achieve a broader political consensus on more austerity, Greek newspapers said on Tuesday.

Financial daily Imerisia said in an unsourced report that Athens had the green light from the “troika” team to lower VAT to 20 percent from the current 23 percent to get the conservative opposition to agree to further measures to cut the budget deficit.

The conservatives, who voted against the bailout plan Athens agreed last May to avoid default, have been pressing for lower taxes to help boost economic activity, arguing that the policy mix applied so far was choking the economy.

Greece took a 110 billion euro ($158 billion) rescue from the European Union and International Monetary Fund last May. The risk of a default on its 327 billion euro debt reared its head because Greece has fallen short of its deficit-reduction goals.

Moves to plug a looming funding gap for 2012 and 2013 became more urgent after the IMF said last week it would withhold the next tranche of aid due on June 29 unless the EU guarantees to meet Athens’ funding needs for next year.

Daily Ethnos also reported that apart from lowering VAT rates, the government wants to exclude those on employment contracts — rather than self-employed — and pensioners from its plan to cut the current 12,000 euro income tax exemption.

“The government is seeking to avoid a new hit on the incomes of vulnerable groups and achieve political consensus at least with the main opposition party, which is something the EU and the IMF are pressing for,” the paper said. (Reporting by George Georgiopoulos; editing by David Stamp)

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