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Austerity budget tabled in parliament

Govt says €5.6bn in tax hikes and spending cuts will produce primary surplus of €3bn

Budget envisages slashing social spending by about €3.2bn, a 6% reduction from its present €52.6 billion to €49.4bn in 2014. Some €2.29bn of those cuts will be from the health and social insurance budget

Finance Minister Yannis Stournaras tables the 2014 budget in parliament, 21 November 2013 (AFP) Finance Minister Yannis Stournaras tables the 2014 budget in parliament, 21 November 2013 (AFP) Austerity measures to the tune of €5.6bn, to be achieved through increasing tax revenue and cutting social spending in 2014, are at the heart of the draft state budget submitted to parliament on Thursday.

The document foresees increasing tax revenue to €49.6bn, up €2.3bn or about 5.5% on the €47.3bn that the government is expected to bring in this year.

It also envisages slashing social spending by about €3.2bn, a 6% reduction from its present €52.6 billion to €49.4bn in 2014. Some €2.29bn of those cuts will be from the health and social insurance budget.

Presenting the document, the finance ministry said the country would return to growth in 2014, achieving a primary surplus of €3bn (up from an expected €812m this year).

As the draft budget has not been approved by the troika, it may be subject to change next year even if it is passed when it comes to a vote in parliament in early December.

This increase will come mainly from increasing direct taxes by 8.5% (to reach €21.5bn) and by reducing indirect taxes by 1.8% (to reach €24.08bn).

An 11.5% increase in income tax is expected to bring that total to €12.9bn while property tax revenue is expected to reach €3.93bn (an increase of 41.4%).

The additional revenue is expected to come from expanding the special property tax (the so-called haratsi) and from income tax, especially through new tax brackets for wage earners, pensioners and the self-employed.

In detail, the increases will come from:

* the replacement of existing income scales with a three-bracket system for all salaried employees and pensioners

* the sinking of the tax-free allowance of €5,000 to €2,100, for those with an income of up to €21,000. This allowance will be reduced by €100 for every additional €1,000 income

* the abolition of the €5,000 tax-free allowance altogether for the self-employed

* the removal of tax breaks for mortgage interest, rent on primary residences, children studying, insurance and private tuition fees

* the estimation of taxes in accordance with the source of income

Critics of the budget say the revenue predictions are based on most favourable macroeconomic variables, in that it foresees only a limited decline in private consumption, the gradual increase in tax compliance in 2014, better success in combating fraud or recovering tax debts to the state.

The discussion on the draft budget will begin at committee level on Monday and be completed over four sessions, Parliamentary Speaker Evangelos Meimarakis said.

It is then expected to come before the house on December 3 or 4, where the debate on it will be completed over five sessions, followed by a roll-call vote.

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