BUSINESS

It’s all change again for Greece’s tax system

By Prokopis Hatzinikolaou

The government is preparing a taxation overhaul that will provide for one set of brackets for all taxable incomes regardless of source. It is also planning to implement a large property tax (LPT) that will concern not only real estate but also big bank deposits, works of art and other investment tools, with a tax-free threshold of 300,000 euros.

That way, besides strengthening revenues, the government expects to respond to criticism from its European peers (mainly the Germans) that the rich have not been taxed in Greece.

The plan foresees an increase in the income tax-free threshold to 16,000 euros per annum for households with two dependent children and 19,000 for families with three children. For single taxpayers the threshold will stand at 12,000 euros and increase depending on the number of children.

The single set of income tax brackets will have more brackets than the existing legislation so as to be fairer on people with lower incomes, while the top brackets will have a higher tax rate than today.

A number of tax exemptions will be granted based on each taxpayer’s income. For example, there will be a tax discount of 20 percent on rent payments for those with an annual income of 15,000 euros, but not for those with an income of 80,000 euros.

There is also a plan for a consumption tax on luxury goods, such as spending on very powerful or expensive vehicles, yachts, aircraft, helicopters, swimming pools etc.

All tax exemptions, incentives and special tax statuses will be revised. There are currently 700 tax exemptions that cost the annual budget about 3.6 billion euros. Special consumption taxes will also go back to the drawing board.

The sum of each taxpayer’s assets will be used for the calculation of the LPT, which will replace the single property tax (or ENFIA, which is only for real estate). It will concern those with assets of 300,000 euros or more and be separate from income tax, while it will be levied regardless of the taxpayer’s income, which means that it will also concern the unemployed who may have inherited a large property or valuable artwork.

Taxpayers will have to pay the LPT for the sum of apartments, buildings, land, artworks, bank deposits, investment products, stocks etc that are in Greece, according to the Property Register (“Periousiologio”), as well as for any assets abroad declared in Greek tax statements (and not taxed in another country).

There will be progressive tax brackets for the LPT and the target for annual revenues will amount to at least the European Union average in property taxation takings.

For the calculation of real estate values, the tax authorities will use updated objective rates that will be annually adjusted to market prices.

As far as indirect taxation is concerned, the Finance Ministry’s plan provides for a reduction in the top value-added tax bracket from the current 23 percent and a low VAT rate for basic food commodities such as bread, milk, pasta etc, as well as catering, children’s food, personal hygiene commodities for the disabled, cultural and knowledge products, and renewable energy sources.

The aim is for the draft laws that reach Parliament to be significantly simpler, and the changes to basic legislation will be uploaded on the Finance Ministry’s website three days after each bill has been voted on.

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