BUSINESS

Measures to bring more taxes

PROKOPIS HATZINIKOLAOU

TAGS: Taxation, Finance

The measures and countermeasures the government is preparing with the approval of the country’s creditors will lead to further tax hikes as of 2019.

For some taxpayers the fresh load will be particularly heavy, not only for the retirees who will see great cuts to their pensions, but also freelance professionals, who besides their increased social security contributions will have to pay more to the tax authorities too.

The planned drop in the tax-free threshold for annual incomes from 8,636 euros today to 5,900 euros for an unmarried single taxpayer will generate extra income tax due amounting to 602 euros. Crucially, even if the tax rate is reduced – in case the countermeasures are activated following high primary surpluses – the net result will still see additional tax for all taxpayers compared to what they pay today.

It remains unclear whether the tax-free threshold of 5,900 euros – which amounts to a tax discount of 1,298 euros per year – will concern all households. Currently the threshold rises depending on family status.

If the primary surplus reaches or exceeds the desired rate of 3.5 percent of gross domestic product, a countermeasure reducing the lowest income tax rate from 22 percent today to 20 percent will be triggered. This will soften the blow for those on lower incomes, but will not avert it altogether.

Besides tax rate changes, negotiations are focused on the few remaining tax exemptions. If cuts are decided on that front too, the discount of 1.5 percent on the tax withheld from salaries and pensions is certain to go, as well as the 10 percent tax discount on medical expenditure (which applies when healthcare spending exceeds 5 percent of the taxable income).

The countermeasures also include a reduction in the Single Property Tax (ENFIA) from 2019. According to government sources, the ENFIA reduction will be horizontal and will amount to around 5 percent, instead of 30 percent, as the Finance Ministry had hoped.

Online