Sources from accounting offices say that they already have orders by several clients to close their books by year-end.
The social security law introduced by former minister Giorgos Katrougalos in May 2016 has resulted in 111,212 self-employed professionals closing their invoice books for services rendered (known as “blokakia”) up to end-November.
Finance Ministry data show that two in five freelancers have been forced out of business by excessive social security contributions combined with changes to income tax and the solidarity levy in order to contain the shrinkage of their incomes. This contraction comes to at least 40 to 50 percent of earnings for those who have braved the hikes and continue to work.
Only around 170,000 blokakia remain active out today from 280,000 before the Katrougalos law came into effect. Sources from accounting offices further warn that they already have orders from several clients to close their books by year-end and terminate their practices.
A number of the 111,212 freelancers who have stopped their declared activity have sought alternative ways of getting paid for their services. Some have simply opted for staying off the books, while others have opened Private Capital Companies (PCs) so as to avoid the huge contributions.
Accountants say there are cases of freelance professionals who were forced by the tough measures to pay taxes and social security contributions that amounted to as much as 80 percent of their income. In 2017 many of these people have either closed their books or formed PCs with others to hedge themselves from the high contributions and taxes to come in 2018. In the first 11 months of the year, 48,787 self-employed have declared the termination of their activity.
Professional associations say that the new way of calculating social security contributions as of 2018 will not only lead to more freelancers terminating their activity, but will also increase tax evasion and reduce the rate of tax and contribution collection. There is therefore a risk that the hikes will lead to the opposite result, the associations warn.
All this is also likely to cause further problems to the state budget revenues, given that taxpayers in general have already been exhausted by their growing obligations.