KEPE: Growth depends on political developments

KEPE: Growth depends on political developments


By Spiros Sideris – Athens

The estimate that the stabilisation of the growth dynamics of the greek economy depends on the forthcoming evaluation of the troika, the debate on the greek debt, but also the developments in the domestic political scene, express the analysts of the Center of Planning and Economic Research (KEPE) in the monthly newsletter published on Tuesday. The same report included a study, which argues for the reduction of corporate taxation.

Specifically, in the report of KEPE, it is mentioned that the growth rate of the greek economy in the second quarter of 2014 dropped by -0.3% compared to the second quarter of 2013.

However, the Center considers that the fact that consumption is showing signs of stabilisation, that the contribution of export activity is increasing and that tourism has recorded a positive growth, combined with monetary policy measures announced by the European Central Bank, may play a decisive role in the recovery of the greek economy.

On this basis KEPE emphasizes that “despite the very positive developments, issues such as the assessment of the greek economy and the debate on the greek debt, as well as developments in the domestic political scene, with the possibility of holding early elections raising concerns, remain openly next time. ”

Analysts of the Center stress that the recent macroeconomic data and leading indicators could be classified as mixed.

The data and trends in certain key indicators reflect the progress made in many areas of the economy and in the area of the reforms, but short-term concerns and uncertainty are fueled in regardto the election of the President of the Republic; a fact that  is reflected in some indicators of the economy.

“At this stage, it is important to implement the planned reform programme, to improve the competitiveness in the greek economy, and the completion of structural reforms for the return of the country to sustainable development”, states the report and acknowledges that the public finances have stabilised significantly and Greece seems to achieve primary surpluses, while gradually regaining the confidence of international markets, which is reflected in the spreads of the greek bonds.

Notes on Taxation

In the analysis contained in the report by KEPE and signed by Athanasios Chymis, is  found, by comparing certain elements, that all countries, with small exceptions, with larger minimum corporate tax rate than Greece have is a better and more efficient collection of taxes.

As noted by the analysts, “characteristic of inefficient use of taxes in Greece is the fact that most countries with lower corporate tax rates also have better efficiency in the use of tax revenues, indicating significant room for improvement in Greece, improvement that will contribute significantly to the creation of fiscal conscience of citizens and thus reduce tax evasion”.

The main conclusion of the analysis is that in Greece any further increase of the corporate tax rate (at least) would not be morally and economically justified, given that countries with lower rates have much better results in all Public sectors.

The analysis shows that, with few exceptions that all countries with higher corporate tax rate thab Greece have shown to their citizens that they make efficient use of their taxes, earning in this way their trust, to a greater degree than in Greece.

These results offer an explanation to the burning issue of the para-economic evasion. “People do not trust their money to the State having experience chronic inefficiency”, says Chymis.