Bank of Greece: Greek fiscal policy mix needs to change

Speaking at the 29th the Greek Economy Conference, organized by the Hellenic-American Chamber of Commerce on Tuesday, the central bank’s chief economic and head of economic analyses, Dimitris Malliaropoulos, highlighted the need to tackle the underground economy, by clamping down on the causes of tax avoidance.

As the BoG official explained, the main motive behind the non-declaring of income was excessive taxation which needs to be urgently addressed. Relevant studies have shown that the Greek economy would benefit from a shift away from tax-centered policies towards as fiscal policy mix that reduces non-productive expenditure, which would lead to a broadening of the tax base.

The interventions being proposed by the BoG specifically entail cutting income tax rates, reducing taxation of corporate profits and slashing social security contributions. According to Malliaropoulos, these moves would attract investment to Greece, as well as human resources which have been heavily affected by a so called brain drain during the decade-long crisis.

Moreover, the Greek central bank recommends ushering in a new productive model based on investment and exports, which would benefit from action to boost competitiveness and financing. Malliaropoulos pointed out the necessity of an “investment shock” in coming years, adding that private investment must rise by as much as 40 percent in years to come.

The BoG’s proposals came on the same day that the Greek Statistics Authority (ELSTAT) published figures showing that the country’s economy grew for a ninth straight quarter in July to September - at a faster pace than the previous quarter - on stronger consumer spending.

GDP grew by 1 percent in the third quarter compared to an upwardly revised 0.4 percent in April to June. On an annual basis, economic expansion accelerated to 2.2 percent in the third quarter from a revised 1.7 percent in the second quarter of 2018.