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Greece's deficit grows despite tax hikes

Greece's deficit grows despite tax hikes
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Greece’s budget deficit continued to widen in September with the country in recession because of the austerity measures introduced to cut spending.

The finance ministry said the central government deficit grew by 15 percent in the first nine months of the year compared with the same period last year. It rose to 19.16 billion euros.

That was despite tax increases that were supposed to bring in more money – tax receipts actually fell.

In September, Athens increased sales tax on restaurants to 23 percent and started collecting a one-off tax ranging from one to five percent on gross income.

But the moves failed to visibly boost net tax receipts, which shrank by 4.2 percent year-on-year in Jan-Sept, compared with a 5.3 percent drop in the first eight months of the year.

Greece said on Wednesday it would catch up with a target to increase net tax receipts by 0.8 percent for the full year, helped by a new property tax and other spending cuts that will kick in in the rest of the year.

“The current revenue shortfall is expected to be dealt with in the last quarter,” the finance ministry said.

Primary spending before interest payments rose by 2.9 percent year-on-year, mainly because the government increased payments to social security organisations, whose revenues are drying up because of the recession.

Debt-laden Greece is scrambling to meet fiscal targets set by its international lenders under a bailout plan so that it can continue to receive EU/IMF funding and avoid default.