ECONOMY

Tax reform puts money in your pocket

One of the immediate benefits of the latest tax reform is the larger monthly paychecks for a big number of salaried workers and pensioners. The government has decided to raise the tax-exempt ceiling on annual incomes from 8,400 to 10,000 euros. The ceiling is increased still more for employees with one or two children. For a parent of three or more children, the tax-exempt ceiling rises to 20,000 euros or more (1,000 euros per child) and, if both parents work, to 30,000 euros or more (for the couple’s total income). As a result of this change, an unmarried person with a monthly net salary ranging from 950 to 2,050 euros will see his or her net salary increase by 16.71 euros. The benefit for a married person with one child is 20.90 euros per month, and for those with two children, 23.33 euros per month. For people earning between 650 and 950 euros per month, the benefits will be fewer, while those earning less than 650 euros will see no difference, since they are already exempt from taxation. For a parent of three or more children, the extra amount per month ranges from 7.31 euros, for those with a gross salary over 950 euros, to a not negligible 147.29 euros for those whose salary exceeds 1,450 euros. It is slightly higher if the children are over 4 years old. For taxation purposes, dependent children are all unmarried minors (under 18), unmarried students between the ages of 18 to 25, those who serve as conscripts and unmarried, divorced or widowed or suffering from severe disabilities. The Ministry of Economy and Finance yesterday published a detailed circular with information on the new tax deductions from salaries and pensions. Contrary to earlier announcement, the latest tax reform leaves the top income tax rate at 40 percent. Initially, it was set to decrease gradually to 35 percent. Corporate tax rates will also be left mostly intact, around 35 percent, disappointing those who had called for more generous tax cuts, to about 25 percent or lower, in order to stimulate production. During the discussion of the 2003 budget in Parliament last week, many MPs, including a number from the ruling Socialist party, complained about the introduction of new tax legislation every year, which did not allow investors to know the exact tax regime they will be investing under. The MPs called for longer-term reforms.