Greece would have had additional revenues of 9.8 billion euros last year had it matched the average level of value-added tax takings among member states of the Organisation for Economic Cooperation and Development, a report by the governor of the Bank of Greece, Giorgos Provopoulos, suggested this week.

His report outlines the central bank’s forecasts for this and next year, while stressing the significance of the government sticking to the streamlining program agreed with the country’s creditors.

The loss of GST revenues is attributed to the chronic problems of the tax collection mechanism, with Provopoulos stressing that its performance is declining further. The problem is further being exacerbated by increasing tax evasion and the lack of liquidity in the market. Had Greece retained the same GST revenues as 2008, it would have had an additional 2.3 billion euros last year, he said.

“On many an occasion in the past the reform initiatives have come up against the illusion that the system which produced an expensive lifestyle through deficits and debts, could be maintained for ever. Nowadays there is no space for such illusions,” argued Provopoulos.

The BoG forecasts that the economy will contract by 4.5 per cent this year and by 0.5 per cent in 2013, before returning to growth in 2014. Harmonized inflation is forecast at 1 per cent for this year and 0.5 per cent in 2013. Employment will decline by 3 per cent this year and the jobless rate will exceed 19 per cent.

The cost of labor declined by 2 per cent in the whole of the economy last year, after a 3.8 per cent decline in 2010, and by 3.9 per cent in the business sector, the report says. Productivity remained unchanged and the average wage of salary workers dropped by 3 per cent. Salaries across the economy will fall by about 9 per cent this year and by a further 7 per cent in 2013.

The report also estimates that by the end of the year some 69 to 75 per cent of the competitiveness lost in the period 2001-09 will have been recovered, with the rest recovered by the end of 2013.

Source: Kathimerini