BUSINESS

The only certainty is tax hikes

PROKOPIS HATZINIKOLAOU

TAGS: Taxation

The additional income tax burden amounting to 1.8 billion euros or 1 percent of gross domestic product is the only tax measure certain to be enforced in the coming years. The promises of easing the burden on the middle class will only be activated if the government manages to exceed the target for a primary budget surplus of 3.5 percent of GDP. For those on lower incomes, the application of the so-called countermeasures will only soften the new blow.

The fresh tax hike will start applying from 2019 and if it fetches the anticipated results then the government at the time will be able to reduce the minimum income tax rate from 22 percent to 20 percent and bring the smallest solidarity levy rate that currently stands at 2.2 percent to zero along with a reduction to the higher rates.

Even with the drastic cut to the tax discount the government has agreed with its creditors, these changes – if and when they are implemented – will lead to the easing of the load on taxpayers with annual incomes in excess of 30,000 euros compared to what they pay today. In contrast, the majority of taxpayers, who earn no more than 30,000 euros per year, will face higher income taxes as of 2020, to the tune of 400 or 650 euros per annum, depending on whether the countermeasures are implemented.

For the first year of the tax hikes – when there will definitely be no countermeasures – and for any of the following years until the countermeasures are put in force, a private sector employee with a monthly income of 715 euros will see his income tax more than treble from the current amount of 300 euros to 950. His tax-free threshold will go down from 8,636 euros nowadays to 5,685 euros and his tax discount will decline from 1,900 euros to just 1,250 euros.

The same tax hike of 650 euros per year will apply to all taxpayers regardless of income category or family status, unlike today when family status determines the precise amount of the maximum tax discount a taxpayer can enjoy.

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