Athens is faced with new tax reality

 Ministers send conflicting signals over the adjustment of taxation policy to the pledges made to creditors

By Prokopis Hatzinikolaou

Adjusting to reality will be particularly difficult for the government, as in the next four months it will have to enforce measures which in many cases run counter to its pre-election pledges.

The restructuring of value-added tax, the gradual increase in the tax-free threshold to 12,000 euros per year for income tax, an amendment in favor of the state?s rather than debtors? interests concerning the 100-installment payment scheme, the reduction of protection limits for main residences and the containment of early retirements are just a few of the measures that are forcing the new administration down to earth with a bump.

Still, the government has not yet examined ? let alone set in stone ? how it will implement the changes it has told its eurozone peers it will make. At the same time, so many disagreements have emerged within the government that it will take at least two to three weeks for the dust to settle to gain a clearer picture.

On the reform of VAT policy, there has been no specific decision; all that has been recorded is some fragmentary statements by government officials that create greater confusion. Finance Minister Yanis Varoufakis told Real FM on Wednesday that ?we may decide on some small change to a VAT rate, which will neither concern the border regions nor books and the press. We are not making any pledges.?

Later, when asked by reporters, Varoufakis said that ?VAT will not be increased. But if we do need to increase the tax on a product, we will see about that.?

Another minister said there will be no VAT hike on medicines, while a third implied that there may be a VAT...