Seeking to stimulate Greece’s battered middle class, a committee chaired by Nobel Prize-winning economist Sir Christopher Pissarides, which has been tasked with drafting a long-term growth strategy for the country, is recommending that tax rates on the incomes of private individuals in that bracket be slashed.
More specifically, in its report to Prime Minister Kyriakos Mitsotakis, the committee recommends a reduction in tax rates, which currently amount to 28% for incomes from 20,000 euros and reach up to 44% for incomes over €40,000.
The committee also recommends the scrapping of the solidarity levy, which the government wants to gradually abolish as of 2021 – the amount paid by taxpayers annually amounts to €1.2 billion.
A tax reduction combined with the abolition of the solidarity levy is expected to significantly stimulate so-called middle-class employees, who were hit harder than any other social category during Greece’s protracted financial crisis in the last decade, and continue to pay very high taxes today.
Indeed, the Greek middle class was dealt the strongest blow during the years that leftist SYRIZA was in government.
What’s more, the middle class did not gain much from last year’s tax bill passed by the current government which rewarded low-income and self-employed professionals.
Tellingly, after the changes in legislation introduced by the current New Democracy government for so-called middle incomes (from €16,000-17,000 up to €50,000), the middle class received measly relief of €17-37 on an annual basis.
For example, an employee with an annual salary of 26,000 euros paid a tax based on 2019 incomes of €4,776 together with the solidarity contribution. This amount has now been reduced to €4,759.
About 1.34 million taxpayers in Greece, most of whom are employees and retirees, declare incomes from €16,000-17,000 up to €50,000.
So while they account for just 15% of the total number of taxpayers, they pay a total of €4.4 billion in taxes, i.e 53% of the total personal income tax.
With this in mind, the Pissarides Committee’s proposal is that taxes be reduced in line with Organization for Economic Cooperation and Development (OECD) recommendations, which for years have called for the slashing of high tax rates.