The Finance Ministry is weighing its options regarding the strengthening of Greek businesses, making them more competitive compared to their European Union peers, increasing economic activity and attracting investments.
The reduction of taxes and social security contributions is on the table for 2020 and it is possible that decisions will be made from the first quarter of next year, meaning that enterprises could soon find out how they will be taxed for the rest of the year. That would allow them to make their own plans, whether that would concern making hirings or investing in equipment or even in staff salary increases.
There are two main scenarios being examined at the ministry, with the first – the baseline scenario – providing for the reduction of the corporate tax rate from 24 to 20 percent for the year 2020. The cost of this measure, amounting to some 500 million euros, would affect the 2021 budget.
This new reduction, hot on the heels of that voted on a few days ago that reduces the corporate tax from 28 to 24 percent for this year’s earnings, would offer an extra boost to enterprises, which in the last few years have been forced to hand over 55 percent of their profits to the state, including their social security dues.
Based on these changes, the average tax rate for corporations (income tax and dividend tax) would drop from 35.2 percent up until a few days ago to 27.8 percent for 2019 and to 24 percent for 2020, which would be below the international average. According to a recent survey by Washington, DC-based think tank the Tax Foundation, the average taxation of corporations internationally this year amounts to 24.18 percent.
The second scenario, which is not as likely as the first, also bears a cost of 500 million euros for the state. It provides for the reduction of employers’ social security contributions, which in some cases reach up to 40.5 percent of salaries. The measure would be beneficial for large, labor-intensive corporations, as it would increase their profits considerably. For smaller enterprises, which constitute the vast majority in Greece, there could be an increase in taxable earnings, but at the end of the day the dues to the state would not be reduced significantly.