Budget deficits, Europes No 1 threat
Greece is facing a serious public finance issue, as the budget gap reached a staggering 12.7% of GDP and a high public debt. Greece ended 2009 with a deficit of 12.7% and a public debt of 113% of GDP.
The Greek government has committed to narrow the budget to 8.7% of GDP this year and to 3% in 2012.
“Governments worldwide have been faced with a dilemma when deciding how to respond to the downturn. The recession has meant less revenue coming in through taxation, leading to shortfalls in the budget. So some countries have reacted by raising taxes. However, increasing the tax burden can also have negative effects- deepening the recession by reducing individuals’ disposable income, or companies’ budgets for investment. So in other countries, governments have reduced taxes to stimulate recovery”, Valentin Tic, Tax Partner at KPMG in Romania pointed out.
For example, in the UK, the Value Added Tax was temporarily reduced from 17.5% to 15% between 1 December 2008 and 1 January 2010.
The Greek government has committed to narrow the budget to 8.7% of GDP this year and to 3% in 2012.
“Governments worldwide have been faced with a dilemma when deciding how to respond to the downturn. The recession has meant less revenue coming in through taxation, leading to shortfalls in the budget. So some countries have reacted by raising taxes. However, increasing the tax burden can also have negative effects- deepening the recession by reducing individuals’ disposable income, or companies’ budgets for investment. So in other countries, governments have reduced taxes to stimulate recovery”, Valentin Tic, Tax Partner at KPMG in Romania pointed out.
For example, in the UK, the Value Added Tax was temporarily reduced from 17.5% to 15% between 1 December 2008 and 1 January 2010.