IMF

Greek bailout agreement reached

Greece agree bailout deal

An agreement was finally reached last Monday for a €86B bailout deal for Greece, the terms of the new bailout included implementing by Wednesday 15th July to pass laws that:

• Implement VAT hikes.
• Cut pensions.
• Take steps to ensure the independence of Greece’s statistics office is maintained.
• Put measures in place to automatically slash spending if Greece fails to meet its targets on primary surpluses (revenue minus expenditure excluding debt servicing costs).

And by Wednesday 22nd July to:

• Overhaul its civil justice system.
• Implement the Bank Recovery and Resolution Directive (BRRD) to bring bank resolution laws in line with the rest of the EU.
• Market reforms with a clear timetable for implementation of all OECD recommendations, including Sunday trade, sales periods, pharmacy ownership, milk and bakeries, except over-the-counter pharmaceutical products, which will be implemented in a next step.
• Privatisation of the electricity transmission network operator (ADMIE), unless replacement measures can be found that have equivalent effect on competition.
• Labour market policies should be aligned with international and European best practices.
• Adopt the necessary steps to strengthen the financial sector. Continue Reading

Greek financial crisis – possible VAT changes

July 2015

Greek VAT reforms in the economic crisis

Yesterday Greece became the first European Union country to miss their deadline to repay a loan, totaling around £1.1bn, from the International Monetary Fund (IMF), after their request for another extension for the previous bailout was denied on Tuesday. By being in arrears to the world’s financial backbone, Greece immediately lose access to IMF resources and could eventually be kicked out of the fund entirely. If the country goes bankrupt or decides to leave the 19-nation Eurozone, the situation could create instability in the region and resonate around the globe.

Greece’s total debt is around €360,000,000,000 which is 180% of its GDP and with around 25% of its citizens unemployed what are Greece doing to try and combat this economic crisis?

Greece’s latest proposals are focused on VAT rates, early retirement measures and tax increases, which aim to cover a good part of the country’s budgetary gap, which is around €900M, the proposals around VAT could bring in around two billion euros. In terms of the VAT proposals last week the government offered VAT increases on a range of products, so the standard rate of 23% would remain but the scope would change with the standard rate being extended to more products including:

• Water supplies
• Transport of passengers
• Social housing
• Repairs to private housing
• Agricultural imports
• Social services
• Food Outlets
• Hotel stays

But nothing is so far confirmed with many other products and services also in the mix for potential VAT raise and the lower 6% reduced rate could be limited to books and medical supplies. Greece’s creditors also want the 30% VAT discount applied to Greek islands eliminated making VAT uniform throughout the country but Greece wants to keep the discount in place. Continue Reading

IMF call on Spain to raise their VAT rate

IMF call on Spain to raise VAT

The International Money Fund has called on Spain to raise its VAT rate, even though they said they are pleased with the progress that Spain has made so far it still needs to see more improvements especially on the high levels of unemployment, currently at 24%.

Spain’s economy is gaining momentum and is expected to grow by 3.1% this year however they still need more revenue to boost their economy and the IMF believe they can best do this by raising their VAT rate. In addition they also say other reforms were needed, such as an overhaul of employment contracts and the introduction of healthcare co-payments.

So far the Spanish Government says it had no plans to raise the VAT rate, but it is something that could be a possibility in the near future if they are to listen to the IMF.

Belgium urged to raise VAT rates

Belgium told by IMF to raise VAT

Belgium has been urged by the International Monetary Fund to raise it VAT rate in order to help fund labour tax cuts, whist Belgium has returned to growth and reduced budget deficits, structural reforms are needed to support growth.

Belgium has already scheduled a cut in the social security levies from 33% to 25% through cuts elsewhere. But the IMF has suggested that a rise in the reduced VAT rate from the current 6% and 12% (on restaurants) or removal of exemptions. Belgium’s standard VAT rate of 21% is currently below the average for the European Union, this is due to the fact they haven’t raised the standard tax since 1996, whereas all its European neighbours have raised theirs.