Dear President of the Eurogroup,
In the Eurogroup of 20
February 2015 the Greek government was invited to present to the
institutions, by Monday 23rd February 2015, a first comprehensive list
of reform measures it is envisaging, to be further specified and agreed
by the end of April 2015. In addition to codifying its reform agenda, in
accordance with PM Tsipras’ programmatic statement to Greece’s
Parliament, the Greek government also committed to working in close
agreement with European partners and institutions, as well as with the
International Monetary Fund, and take actions that strengthen fiscal
sustainability, guarantee financial stability and promote economic
recovery. The first comprehensive list of reform measures follows below,
as envisaged by the Greek government. It is our intention to implement
them while drawing upon available technical assistance and financing
from the European Structural and Investment Funds.
Truly Yanis Varoufakis Minister of Finance Hellenic Republic
I. Fiscal structural policies
Tax policies – Greece commits to:
- Reform VAT
policy, administration and enforcement. Robust efforts will be made to
improve collection and fight evasion making full use of electronic means
and other technological innovations. VAT policy will be rationalised in
relation to rates that will be streamlined in a manner that maximises
actual revenues without a negative impact on social justice, and with a
view to limiting exemptions while eliminating unreasonable discounts.
- Modify the taxation of collective investment and income tax expenditures which will be integrated in the income tax code.
- Broaden definition of tax fraud and evasion while disbanding tax immunity.
- Modernising
the income tax code and eliminating from it tax code exemptions and
replacing them, when necessary, with social justice enhancing measures.
- Resolutely enforce and improve legislation on transfer pricing.
- Work
toward creating a new culture of tax compliance to ensure that all
sections of society, and especially the well-off, contribute fairly to
the financing of public policies. In this context, establish with the
assistance of European and international partners, a wealth database
that assists the tax authorities in gauging the veracity of previous
income tax returns.
Public Finance Management – Greece will:
- Adopt amendments
to the Organic Budget Law and take steps to improve public finance
management. Budget implementation will be improved and clarified as will
control and reporting responsibilities. Payment procedures will be
modernised and accelerated while providing a higher degree of financial
and budgetary flexibility and accountability for independent and/or
regulatory entities.
- Devise and implement a strategy on the clearance of arrears, tax refunds and pension claims.
- Turn the already established (though hitherto dormant) Fiscal Council into a fully operational entity.
Revenue administration
– Greece will modernise the tax and custom administrations benefiting
from available technical assistance. To this end Greece will:
- Enhance the
openness, transparency and international reach of the process by which
the General Secretary of the General Secretariat of Public Revenues is
appointed, monitored in terms of performance, and replaced.
- Strengthen
the independence of the General Secretariat of Public Revenues (GSPR),
if necessary through further legislation, from all sorts of interference
(political or otherwise) while guaranteeing full accountability and
transparency of its operations. To this end, the government and the GSPR
will make full use of available technical assistance.
- Staff
adequately, both quantitatively and qualitatively, the GSPR and in
particular the high wealth and large debtors units of the revenue
administration and ensure that it has strong investigative/prosecution
powers, and resources building on SDOE’s capacities, so as to target
effectively tax fraud by, and tax arrears of, high income social groups.
Consider the merits of integrating SDOE into GSPR.
- Augment
inspections, risk-based audits, and collection capacities while seeking
to integrate the functions of revenue and social security collection
across the general government.
Public spending – The Greek authorities will:
- Review and
control spending in every area of government spending (e.g. education,
defence, transport, local government, social benefits)
- Work
toward drastically improving the efficiency of central and local
government administered departments and units by targeting budgetary
processes, management restructuring, and reallocation of poorly deployed
resources.
- Identify cost saving measures through a thorough
spending review of every Ministry and rationalisation of non-salary and
non-pension expenditures which, at present, account for an astounding
56% of total public expenditure.
- Implement legislation
(currently in draft form at the General Accounts Office - GAO) to review
non-wage benefits expenditure across the public sector.
- Validate
benefits through cross checks within the relevant authorities and
registries (e.g. Tax Number Registry, AMKA registry) that will help
identify non-eligible beneficiaries.
- Control health expenditure
and improve the provision and quality of medical services, while
granting universal access. In this context, the government intends to
table specific proposals in collaboration with European and
international institutions, including the OECD.
Social security reform – Greece is committed to continue modernising the pension system. The authorities will:
- Continue to work
on administrative measures to unify and streamline pension policies and
eliminate loopholes and incentives that give rise to an excessive rate
of early retirements throughout the economy and, more specifically, in
the banking and public sectors.
- Consolidate pension funds to achieve savings.
- Phase out charges on behalf of ‘third parties’ (nuisance charges) in a fiscally neutral manner.
- Establish
a closer link between pension contributions and income, streamline
benefits, strengthen incentives to declare paid work, and provide
targeted assistance to employees between 50 and 65, including through a
Guaranteed Basic Income scheme, so as to eliminate the social and
political pressure for early retirement which over-burdens the pension
funds.
Public administration & corruption – Greece wants a modern public administration. It will:
- Turn the fight against corruption into a national priority and operationalize fully the National Plan Against Corruption.
- Target
fuel and tobacco products’ smuggling, monitor prices of imported goods
(to prevent revenue losses during the importation process), and tackle
money laundering. The government intends immediately to set itself
ambitious revenue targets, in these areas, to be pursued under the
coordination of the newly established position of Minister of State.
- Reduce
(a) the number of Ministries (from 16 to 10), (b) the number of
’special advisors’ in general government; and (c) fringe benefits of
ministers, Members of Parliament and top officials (e.g. cars, travel
expenses, allowances)
- Tighten the legislation concerning the
funding of political parties and include maximum levels of borrowing
from financial and other institutions.
- Activate immediately the
current (though dormant) legislation that regulates the revenues of
media (press and electronic), ensuring (through appropriately designed
auctions) that they pay the state market prices for frequencies used,
and prohibits the continued operation of permanently loss-making media
outlets (without a transparent process of recapitalisation)
- Establish
a transparent, electronic, real time institutional framework for public
tenders/procurement – re-establishing DIAVGEIA (a side-lined online
public registry of activities relating to public procurement)
- Reform
the public sector wage grid with a view to decompressing the wage
distribution through productivity gains and appropriate recruitment
policies without reducing the current wage floors but safeguarding that
the public sector’s wage bill will not increase
- Rationalise
non-wage benefits, to reduce overall expenditure, without imperilling
the functioning of the public sector and in accordance with EU good
practices
- Promote measures to: improve recruitment mechanisms,
encourage merit-based managerial appointments, base staff appraisals on
genuine evaluation, and establish fair processes for maximising mobility
of human and other resources within the public sector
II. Financial stability Instalment schemes – Greece commits to
- Improve swiftly, in agreement with the institutions, the legislation for repayments of tax and social security arrears
- Calibrate
instalment schemes in a manner that helps discriminate efficiently
between: (a) strategic default/non-payment and (b) inability to pay;
targeting case (a) individuals/firms by means of civil and criminal
procedures (especially amongst high income groups) while offering case
(b) individuals/firms repayment terms in a manner that enables
potentially solvent enterprises to survive, averts free-riding, annuls
moral hazard, and reinforces social responsibility as well as a proper
re-payment culture.
- De-criminalise lower income debtors with small liabilities
- Step
up enforcement methods and procedures, including the legal framework
for collecting unpaid taxes and effectively implement collection tools
Banking and Non-Performing loans. Greece is committed to:
- Banks that are run on sound commercial/banking principles
- Utilise
fully the Hellenic Financial Stability Fund and ensure, in
collaboration with the SSM, the ECB and the European Commission, that it
plays well its key role of securing the banking sector’s stability and
its lending on commercial basis while complying with EU competition
rules.
- Dealing with non-performing loans in a manner that
considers fully the banks’ capitalisation (taking into account the
adopted Code of Conduct for Banks), the functioning of the judiciary
system, the state of the real estate market, social justice issues, and
any adverse impact on the government’s fiscal position.
- Collaborating
with the banks’ management and the institutions to avoid, in the
forthcoming period, auctions of the main residence of households below a
certain income threshold, while punishing strategic defaulters, with a
view to: (a) maintaining society’s support for the government’s broad
reform program, (b) preventing a further fall in real estate asset
prices (that would have an adverse effect on the banks’ own portfolio),
(c) minimising the fiscal impact of greater homelessness, and (d)
promoting a strong payment culture. Measures will be taken to support
the most vulnerable households who are unable to service their loans
- Align
the out-of-court workout law with the instalment schemes after their
amendment, to limit risks to public finances and the payment culture,
while facilitating private debt restructuring.
- Modernise bankruptcy law and address the backlog of cases
III. Policies to promote growth
Privatisation and public asset management – To attract investment in key sectors and utilise the state’s assets efficiently, the Greek authorities will:
- Commit not to
roll back privatisations that have been completed. Where the tender
process has been launched the government will respect the process,
according to the law.
- Safeguard the provision of basic public
goods and services by privatised firms/industries in line with national
policy goals and in compliance with EU legislation.
- Review
privatisations that have not yet been launched, with a view to improving
the terms so as to maximise the state’s long term benefits, generate
revenues, enhance competition in the local economies, promote national
economic recovery, and stimulate long term growth prospects.
- Adopt,
henceforth, an approach whereby each new case will be examined
separately and on its merits, with an emphasis on long leases, joint
ventures (private-public collaboration) and contracts that maximise not
only government revenues but also prospective levels of private
investment. Unify (HRDAF) with various public asset management agencies
(which are currently scattered across the public sector) with a view to
developing state assets and enhancing their value through microeconomic
and property rights’ reforms.
Labor market reforms – Greece commits to:
- Achieve EU best
practice across the range of labour market legislation through a process
of consultation with the social partners while benefitting from the
expertise and existing input of the ILO, the OECD and the available
technical assistance.
- Expand and develop the existing scheme
that provides temporary employment for the unemployed, in agreement with
partners and when fiscal space permits and improve the active labour
market policy programmes with the aim to updating the skills of the long
term unemployed.
- Phasing in a new ‘smart’ approach to
collective wage bargaining that balances the needs for flexibility with
fairness. This includes the ambition to streamline and over time raise
minimum wages in a manner that safeguards competiveness and employment
prospects. The scope and timing of changes to the minimum wage will be
made in consultation with social partners and the European and
international institutions, including the ILO, and take full account of
advice from a new independent body on whether changes in wages are in
line with productivity developments and competitiveness.
Product market reforms and a better business environment – As part of a new reform agenda, Greece remains committed to:
- Removing barriers to competition based on input from the OECD.
- Strengthen the Hellenic Competition Commission.
- Introduce
actions to reduce the burdens of administrative burden of bureaucracy
in line with the OECD’s input, including legislation that bans public
sector units from requesting (from citizens and business) documents
certifying information that the state already possesses (within the same
or some other unit).
- Better land use management, including
policies related to spatial planning, land use, and the finalisation of a
proper Land Registry
- Pursue efforts to lift disproportionate
and unjustified restrictions in regulated professions as part of the
overall strategy to tackle vested interests.
- Align gas and electricity market regulation with EU good practices and legislation
Reform of the judicial system – The Greek government will:
- Improve the organisation of courts through greater specialisation and, in this context, adopt a new Code of Civil Procedure.
- Promote the digitisation of legal codes and the electronic submission system, and governance, of the judicial system.
Statistics – The Greek government reaffirms its readiness to:
- Honour fully the
Commitment on Confidence in Statistics, and in particular the
institutional independence of ELSTAT, ensuring that ELSTAT has the
necessary resources to implement its work programme.
- Guarantee
the transparency and propriety of the process of appointment of the
ELSTAT President in September 2015, in cooperation with EUROSTAT.
IV. Humanitarian Crisis – The Greek government affirms its plan to:
- Address needs
arising from the recent rise in absolute poverty (inadequate access to
nourishment, shelter, health services and basic energy provision) by
means of highly targeted non-pecuniary measures (e.g. food stamps).
- Do
so in a manner that is helpful to the reforming of public
administration and the fight against bureaucracy/corruption (e.g. the
issuance of a Citizen Smart Card that can be used as an ID card, in the
Health System, as well as for gaining access to the food stamp program
etc.).
- Evaluate the pilot Minimum Guaranteed Income scheme with a view to extending it nationwide.
- Ensure that its fight against the humanitarian crisis has no negative fiscal effect.
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