With deadlines looming for drawing up next year’s economic policy, the government has decided on three tax breaks, is mulling another two and, depending on how economic growth and revenues pan out, may spring a couple more surprises.
The three tax cuts the government has decided on are the lowering of the corporate tax from 24% to 22% and two extensions of “temporary” measures – the non-payment of the so-called “solidarity contribution” by, relatively well-off, private sector employees and the lowering of social security contributions by 3%.
The two cuts under consideration are the complete abolition of the solidarity contribution and the lowering of property tax rates.
And the two “surprises” – unlikely but still under consideration – are the abolition of the business tax on independent professionals and the lowering of indirect taxes such as the top value-added tax (VAT) bracket of 24%.
The decision on which further tax cuts to institute cannot be delayed for too long: On September 11, Prime Minister Kyriakos Mitsotakis will deliver the keynote speech at the Thessaloniki International Fair (TIF), in which premiers traditionally announce the coming year’s policy goals. And on October 3, the draft 2022 budget must be submitted to Parliament.
The three certain tax cuts will cost the government €2 billion in revenue. This is part of the government’s message that, despite the continued effects of the pandemic, it is prepared to maintain gains in purchasing power due to the measures enacted to support the economy. Not continuing with the suspension of the solidarity contribution and the lower social security contributions, for instance, would hit all private sector employees whose monthly salaries exceed €1,000. The self-employed would be hit as well.
Looking further to the tax cut possibilities, abolishing the business tax on the self-employed, which ranges from €650 for even those without discernible economic activity to over €1,250 for business owners of multiple branches, has a limited fiscal cost but an immense political benefit. But the government has already provided for professionals and is wary of giving more.