BUSINESS

Burden on Greeks set to ease in January

PROKOPIS HATZINIKOLAOU

TAGS: Finance

Every year Greek enterprises and households pay the state taxes and social security contributions amounting to 41.5% of the country’s annual gross domestic product, according to Eurostat data for 2018. This amounts to a sum of 76 billion euros. Greece’s rate puts it among the countries with the highest burden.

In 2010 taxes and contributions amounted to 34.2% of GDP, rising to 39.6% in 2015, and the 41.5% mentioned above also applied up until mid-2020, as since July contributions have been reduced by 0.9 percentage points.

The processing of data shows that in all countries that resorted to the bailout mechanism except for Greece, corporations and individuals used to and still pay less in taxes and contributions: The Portuguese pay the state a sum amounting to 37.2% of their GDP, the Spanish 35.4% and the Cypriots 33.8%. The Irish fare better than everyone, paying out just 23% of their GDP.

In Greece the costs for enterprises remain particularly high, while the net amount eventually paid to workers is considerably smaller. Therefore, when an employee receives a net monthly salary (after taxes and contributions) amounting to €1,923, the cost for his employer comes to €3,729. Therefore, out of the money the corporation pays for an employee’s salary, the worker only collects 51.5%.

Nevertheless, things will be much better from January 2021, raising the rate that the employee collects to 55% of the total cost for the employer. Workers’ takings will grow by 5% compared to what they will continue to get up until the end of 2020. This is thanks to the 7.5% reduction in the social security contributions employers and employees pay and the suspension of the solidarity levy that will apply from January 2021.

For example, this year a corporation pays out €1,864.95 per month for an employee. The employer’s social security contributions come to €364.95, the employee’s contributions amount to €229.95, the salaried service tax reaches up to €139.31 and the solidarity levy stands at €9.08. The cash that the employee gets after all that is just €1,122.66 and accounts for 60% of the cost for the enterprise. As of January next year, the net salary they will get rises to €1,144, while the cost for their employer will decline to €1,838.

Online