Retrenchments strain municipalities

On Wednesday, the government published the details of the tax increments and spending cuts announced last week, which, instead of the initially estimated 600 million, stand at 500 million euro. The Pigouvian taxes – for example, taxation on alcohol and tobacco – in particular will be raised. The most substantial cuts, meanwhile, target municipal subsidies and are hence expected to put pressure on local governments to introduce municipal tax hikes. Elsewhere, the decision to slash the corporate tax to 20 per cent is estimated to translate to an annual loss of 960 million euro in tax revenue. The retrenchments kindled firm resistance from the opposition parties, which accused the government of transferring difficult decisions to municipalities and deemed the drastic corporate tax cut reckless.

HT-STT