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Financial News: Plan targets 25 pct cut in social insurance contributions by 2013

Δημοσίευση 21 Δεκεμβρίου 2010, 11:17 / Ανανεώθηκε 27 Ιουνίου 2013, 14:55
Financial News: Plan targets 25 pct cut in social insurance contributions by 2013
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Social insurance contributions are to be cut by up to 25 percent by the year 2013, Alternate Labour and Social Insurance Minister George Koutroumanis announced on Monday at the Economist's Second Social Security Conference in Athens.

Social insurance contributions are to be cut by up to 25 percent by the year 2013, Alternate Labour and Social Insurance Minister George Koutroumanis announced on Monday at the Economist's Second Social Security Conference in Athens.

Koutroumanis said that the reduction will begin at 10 percent in the middle of 2011 and inclusion in the measure will be open to businesses that promptly pay their social insurance contributions and have joined the labour ministry's electronic control system for businesses. The system will link businesses up with the Social Insurance Foundation (IKA), the manpower employment agency OAED and the Labour Inspectors' Corps and go online on July 1, 2011, the date when payment of contributions must be made through banks.

Employees will be recorded in the system using a card based on their social security number that will be used to check when they are in and out of work, their working hours and any other change relating to their work.

The new system will allow authorities to cross-check information supplied by businesses, initially on a voluntary basis for larger businesses but gradually becoming mandatory for all businesses.

Koutroumanis explained that the reduction in social insurance contributions will be progressive and linked to the degree with which companies are linked up to the new electronic system, reaching 25 percent in 2013. The reduction will be proportionally divided between the contributions paid by employees and those paid by employers.

The minister stressed that the reduction will have an adverse effect on the financing of social insurance funds because the new system of electronic monitoring will allow control of undeclared employment that is estimated to cost funds up to 10 billion euros.

Koutroumanis also reported a 2.5 percent increase in social insurance contributions collected in 2010, or 550 million euro against a target increase of 720 million euro. He stressed that the increase had been achieved in spite of a rise in unemployment and was mainly due to collection of previously uncollected contributions that were owed.

He noted that the divergence from the target increase in collected contributions was offset by a reduction for the first time in 20 years of spending on health care. This had been reduced by 10 percent or 850 million euro, while there was also a 15 percent reduction in operating costs.

The ministry budget envisaged a further reduction of 1.4 billion euro in pharmaceutical spending and general spending on health care in 2011, while targeting an increase in contributions by 1.2 billion euro, Koutroumanis added.