ATHENS (Reuters) - Greece's leftist government suspended plans on Wednesday to increase tax on rental incomes after a public outcry, saying it was still negotiating with international lenders on required reforms ahead of key parliamentary vote this week.
Parliament is expected to approve a set of austerity measures and reforms agreed with its EU/IMF creditors by Friday. Athens needs the legislation to receive a positive first review and get the next instalment of a 86 billion euro (63.65 billion pound) bailout that is keeping the state afloat.
Prime Minister Alexis Tsipras, who clinched the bailout deal in July after going back on pledges to end austerity, wants Athens to wrap up its review quickly and start talks on much-needed debt relief by the end of the year.
But the re-elected premier's plans still face resistance in a country that has suffered six years of recession and is worn down by austerity. Labour unions have planned protest rallies outside parliament on Friday.
"The minister responsible announced that the tax would not be increased," government spokeswoman Olga Gerovassili said acknowledging that there were protests against the hikes. "The negotiation, the effort to win as much as possible, continues."
About three-quarters of Greeks own their homes and many rent out their property. But due to the crisis, tenants have increasingly failed to pay their rent and the tax measure would further burden owners who already pay high property taxes.
The proposed increase was slated to raise 200 million euros.
It was unclear whether the country's creditors had consented to the latest changes, but a source close to the lenders said what mattered was that the measure be included in a planned income tax reform before the bailout review.
Gerovassili said negotiations on the bill would continue until Friday night and there could be more changes.
The package also scraps a law that allowed the state to collect rental income directly from tenants rather than making owners pay tax on uncollected rents. Athens said it wanted to find alternatives.
"We are in talks... and we are trying to find which amendment will replace it," Deputy Finance Minister Tryfon Alexiadis told lawmakers.
(Reporting by Renee Maltezou; Editing by Paul Taylor)