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Fiscal support measures for 2021 overshoot targets

According to the Medium Term plan, the support package will be withdrawn next year, drastically lowering cash costs for the state to 2.079 billion euros from 15.611 billion euros, which means savings of 13.532 billion euros.

Greece’s Medium Term Fiscal Strategy Framework 2022-2025 shows that the Finance Ministry has been forced into revising its targets as a result of the additional blow dealt by the pandemic, inflating government support measures by 8.3 billion euros.

The increase in the cost of dealing with the fallout from the health crisis increased the general government deficit by 5.474 billion euros, bringing it to an estimated 16.990 billion euros, or 9.9 percent of GDP, compared with 11.561 billion euros or 6.7 percent of GDP in the state budget. A corresponding deterioration of 5.656 billion euros is recorded in the primary deficit with the bar being set at 12.247 billion euros or 7.1 percent of GDP from 6.591 billion euros or 3.8 percent.

As stated in the Medium Term plan, "the cash costs of the additional interventions in relation to the budget estimates amount to 8.3 billion euros, while part of them were covered by reallocating of state investment expenditures and programs, as well as funds from the European React-EU program . The negative revision is mainly due to additional interventions and the extension of income support measures for individuals and businesses affected by the third wave of the pandemic and the consequent restrictions on traffic and economic activity and are related to the international availability of vaccines and the rate of new COVID-19 mutations spreading in Europe, factors that could not be accurately predicted in November 2020."

The comparative tables of the Medium Term show that the extra budgetary burden came from the extension and enrichment of the tax regulations and the direct assistance, but also from the lower receipts from income tax of natural and legal persons due to the suspension of the solidarity tax, lower tax rates, the tax advance and the reduction of incomes that will be declared this year due to the pandemic.

On the revenue front, the deficit amounts to a total of 1.980 billion euros, but the revenue gap in taxes is 2.306 billion euros (at 45.530 billion euros from 47.836 billion euros) and the losses are distributed as follows:

  • 481 million euros from taxes on goods and services of which 468 million euros come from VAT with total revenues estimated at 25.919 billion euros from 26.401 billion euros
  • 1.717 billion euros from the income tax of natural and legal persons. Revenue from this source lands at 13.023 billion euros from 14.741 billion euros. The largest losses of 1.108 billion euros are recorded in corporate income tax, while 608 million euros is the estimated shortfall in the income tax of natural persons.

According to the Medium Term plan, the support package will be withdrawn next year, drastically lowering cash costs for the state to 2.079 billion euros from 15.611 billion euros, which means savings of 13.532 billion euros, with an automatic corresponding reduction of the deficit.

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