By Prokopis Hatzinikolaou

The new tax bill that the Finance Ministry submitted in Parliament on Thursday night adheres to what the country’s creditors have dictated in a bid to save some 2.5 billion euros, with virtually all taxpayers sharing the burden of the fiscal streamlining.

Abolishing tax exemptions combined with the radical reform of tax brackets for salary workers and pensioners and the creation of a special set of brackets for the self-employed will lead to major tax increases for households and companies as regards 2013 incomes and profits.

The highest tax bracket for salary workers and pensioners will have a rate of 42 percent and affect annual incomes in excess of 42,000 euros, while the tax-free threshold of 5,000 euros per year has been abolished and replaced by a maximum tax reduction of 2,100 euros for incomes up to 21,000 euros per year; this will be without the collection of receipts. This reduction will shrink by 100 euros for each 1,000 euros of income on top of 21,000 euros, up to incomes of 42,000 euros that will see no reduction at all. A second tax bill, which may be tabled in January, will provide new incentives for tax payers to collect receipts.

The three brackets created provide for a tax rate of 22 percent for revenues up to 25,000 euros per year, 32 percent for revenues between 25,001 and 42,000 euros, and 42 percent for annual revenues of more than 42,000 euros. The additional tax-free thresholds for families with children have also been abolished and replaced by benefits.

The self-employed and small enterprises will suffer significant tax hikes as their incomes will be taxed from the first euro as of next year. It is strange, however, that revenues from work are taxed at a maximum rate of 42 percent, while revenues from rents have a maximum rate of just 33 percent.