Varoufakis’ 6 reforms: 3 for humanitarianism and 3 for tax
Finance Minister Yanis Varoufakis is heading to the Eurogroup meeting of the euro area’s finance ministers on Monday with six proposals aimed at appeasing them. In an effort to reach a compromise, he is pulling back the proposal for a 50% haircut from the settlement of debts in 100 installments because budget deficits are already at 1 bln euros per month and the fiscal gap in April is already estimated to be at 3 bln euros.
In February, the 1-bln-euro fiscal gap in tax revenue for January not only wasn’t covered but practically doubled with the government now focused on proposing reforms to present to its international creditors aimed at dealing with the humanitarian crisis at a cost of 200-250 mln euros just for starters.
The six measures that Varoufakis is presenting to creditors are
1. / 2. Humanitarian Crisis – Administrative Reform
Greece’s creditors aren’t negative concerning food and power to vulnerable households but want these to be counterbalanced with other measures, especially considering the government’s abolition of the 5-euro fee for every hospital visit. On its part, the government hopes that it can fund its humanitarian program with cost-saving to occur through the better administration and modernization of the public sector with introduction of various measures e.g. “smart” citizen cards, etc.
3. A draft bill restructuring payment of debts owed to the State and social security funds
No more “haircuts” are being discussed, but the 100-installments settlement for overdue debts hope to gain revenue for the government.
4. Tax Administration reform
The government wants to commit to an independent General Secretariat of Public Revenue, but wants the group’s responsibilities to be cut and moved to the political leadership of the ministry. Brussels is concerned regarding this decision.
5. Activation of a Tax Council
This is viewed as a government “trick” that merely takes the current Fiscal Council that already exists and is renamed the Tax Council, an institution whose existence the International Monetary Fund (IMF) has demanded from other countries, such as Romania.
6. Outsourcing tax and creating a new flexible body targeting tax audits, consisting of strictly temporary auditors
The body targeting tax audits will have the participate of private offices (lawyers etc.) as recommended by the Task Force and 500-800 foreign tax auditors. It is an idea that the the finance ministers of Germany, France and the UK have already suggested to Varoufakis.