Greek prime minister promises corporate tax cut, as thousands march to protest austerity

By Nicholas Paphitis, AP
Sunday, September 12, 2010

Greek prime minister outlines economic policy

THESSALONIKI, Greece — Greece’s prime minister has promised to lower some corporate taxes to help revive the debt-plagued country’s shrinking economy, while thousands of protesters marched — mostly peacefully — against the government’s harsh austerity measures.

Prime Minister George Papandreou promised on Saturday that the tax rate on companies’ retained profits would be cut from 24 to 20 percent next year, providing what he called “a strong incentive for investments and competitiveness.”

During his annual speech on the economy on the sidelines of a trade fair in northern Greece, he also pledged to open up restricted professions — including truck drivers, notaries, taxi drivers and pharmacists — deregulate the energy market, settle on privatization targets, facilitate major investments and simplify business licensing procedures by the end of this year.

Papandreou is expected to give more details on his economic policy Sunday during a news conference at the trade fair. The Thessaloniki fair is traditionally used by prime ministers to outline their economic policy for the year ahead and make pledges of handouts. This year, however, Papandreou was short on the handouts of old, although he pledged to support the more vulnerable sectors of society, including by providing a social security safety net for older workers who had been fired.

The government has pledged to overhaul the economy by implementing strict fiscal control in an effort to reduce the budget deficit from 13.6 percent of annual output in 2009 to 8.1 percent this year, in return for rescue loans from the International Monetary Fund and other countries using the euro that prevented Greece from defaulting on its debts in May.

The austerity measures, which have included cutting public sector salaries, trimming pensions and raising consumer and income taxes, have angered unions.

About 20,000 people gathered in three separate protests in the northern port city of Thessaloniki before Papandreou’s speech, watched over by 4,500 police deployed in the city.

Minor clashes broke out as scores of youths attacked riot police with sticks and were repelled with tear gas. No injuries were reported during the clashes, which are an almost annual event at the Thessaloniki trade fair. Police pre-emptively detained 20 people, including 13 from Spain, Italy, Britain and Portugal.

State revenues are increasing at a lower-than-projected rate, and the government has said it may have to increase sales tax rates on a broad range of goods, or raise heating fuel costs.

Papandreou vowed to crack down on rampant tax evasion, but at the same time said he would offer businesses the opportunity to settle tax disputes with the state out of court — and accelerate judicial procedures. Out of the estimated 400,000 cases pending in Greek courts, some 150,000 concern tax disputes.

Greek officials insist that along with the pain, the country’s worst postwar economic crisis will allow key reforms to the bloated, inefficient public sector and encourage a healthier development model.

“We can change the course of history and make an opportunity out of the crisis,” Papandreou said, adding that Greece would seek to draw investments worth €44 billion ($56 billion) in environmentally friendly projects by 2015.

“Our choice to go from an economy that for years was based on consumption and credit to a productive model based on green development is of strategic importance,” he said

Inspectors from the EU and IMF next week will review the progress of austerity measures required for the bailout loans, as well as on efforts to cut the budget deficit. The country is due to receive €9 billion ($11.45 billion) over the next few days in the second installment of the loans.

Associated Press writers Costas Kantouris and Elena Becatoros contributed to this report.

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