Greece passes new property-tax legislation
Dec. 21, 2013, 9:20 a.m. EST
By Nektaria Stamouli
ATHENS--Greek parliament Saturday passed a controversial new property tax that has been years in the making and demanded by international creditors, but the government lost one deputy, who failed to back the property bill.
The legislation was supported by the two-party coalition of the conservative New Democracy and the socialist, or Pasok, parties.
But lawmaker Byron Polydoras voted against the bill and was expelled from the government.
This reduces the already slim majority of the coalition government to 153 in the country's 300-seat parliament.
The new levy will provide a boost to Greece's budget revenues by rolling several taxes into one, but is also seen as harming the economy's expected rebound next year, driving dented property prices further lower.
By targeting revenues of some 2.6 billion euros per year, the law imposes a tax on residential housing, commercial properties, vacant property lots, farms and sports fields. At the same time, it slashes property transfer taxes by more than 50% and offers discounts to those who prove they cannot afford to pay it.
In September 2011, after facing a budget shortfall just months after receiving its first bailout from international creditors, Greece imposed a real estate tax that it placed on electricity bills and is collected by the country's power company.
Known as the haratsi, the tax has become one of the most unpopular measures Greece has undertaken in its bid to improve its fiscal health. Greece is now replacing this tax with a new one, which effectively shifts the tax burden onto the assets of tax payers rather than just assessing the income of those possessing the property.
The law has been given the nod by the country's international creditors, its euro zone partners and the International Monetary Fund, who are demanding that Greece moves ahead with a series of structural reforms to keep funding lines open to its EUR240 billion rescue package.
Property prices have fallen by an average of 32% since the country's crisis broke out four years ago, according to the Greek central bank. They are tipped to come under further pressure next year despite the economy's expected return to growth.
Alpha Bank argues that the tax is not being fairly imposed on all property owners across the country, excessively weighing down real estate located in the cities.
"It is absolutely certain that tax will amount to essential obstacles to a recovery of the property market and the economy in 2014, despite the very favourable consequence that the significant reduction in transfer tax may have," said Alpha Bank in a report.
Later Saturday, Greek parliament is expected to pass another law renewing a ban on some primary home foreclosures for one more year in 2014, without the full blessings of the troika on that.
"We are bringing a bill to parliament without having reached a full agreement with the troika but also without a stated objection from their part," Development Minister Kostis Hatzidakis told reporters earlier this week, while presenting the bill.
The Greek government is concerned that a wave of foreclosures would weigh on the already weakened property market of the crisis-battered country, as mortgage defaults alone are now running at a staggering 24%--about 17.4 billion euros in total.
The new legislation extends a freeze on home foreclosures for one more year, but only for primary properties valued at up to 200,000 euros and households with an annual net income of under 35,000 euros. The total value of the real estate and liquid assets cannot exceed 270,000 euros, while bank deposits, shares or bonds cannot exceed 15,000 euros.
Write to Nektaria Stamouli at nektaria.stamouli@wsj.com and Stelios Bouras at stelios.bouras@wsj.com
