Whether or not the International Monetary Fund participates in the Greek bailout program will likely determine whether the reduction of the tax-free threshold will be implemented next January, a year earlier than planned, resulting in yet another major tax hike for Greek taxpayers.
The Fund has repeatedly argued that the Greek primary budget surplus will not reach 3.5 percent of gross domestic product unless the tax-free ceiling comes down from 2019, along with the abandonment of the so-called “good measures” passed, as they will upset the fiscal balance.
If that happens, Greeks will suffer a double blow, as besides the 35 percent reduction of the tax discount, pensions will also be curtailed, with 1.1 million pensioners in effect suffering the loss of two to three monthly pensions a year.
Most taxpayers will be forced to pay an average of 500 euros a year due to the reduction of the income tax discount: Salary workers, pensioners and farmers will be hit with a fresh burden that along with the cuts to benefits and pensions will take a heavy toll on household budgets.
The slashing of 650 euros per year from the tax discount (from 2,000 to 1,350 euros) for a family with two children will mean that their annual tax-free threshold drops from 8,864 to 5,905 euros.
Therefore some 1 million individuals who are currently below the tax-free ceiling will have to pay income tax for the first time, while pensioners with a monthly income of 1,250 euros will see almost three monthly pensions disappear.
Many more taxpayers will also have to pay additional amounts in tax due to the mechanism assessing their income through their assets (that are known as “tekmiria”): Taxpayers with low salaries or pensions, who may even live in rented accommodation, are likely to be taxed not according to their declared incomes but based on their assets, forcing them to pay tax for the first time as they will cease to be below the tax-free ceiling. Finance Ministry officials estimate that the taxable income from “tekmiria” will soar to 10 billion euros, from the current 7 billion euros.