Easing tax on middle incomes

Gov’t considering cutting taxation on those earning between 20,000 and 50,000 euros a year

Easing tax on middle incomes

The ruling New Democracy party is planning ahead for the next four years, with a focus on reforming the two tax brackets within which incomes from salaries and pensions as well as income from rents are taxed.

According to sources, emphasis will be placed on easing the burden on middle incomes, specifically from 20,000 to 50,000 euros, which were also the losers following the changes the government made after its election in 2019.

At the same time a solution is also being sought for how to tax incomes earned by freelancers and the self-employed. This category of taxpayers was the one that benefited the most from the tax scale established in 2019 (and applied to 2020 incomes), as their burden was significantly reduced. Specifically, the 9% rate for the first €10,000 of income, from 22% from the first euro of income (a bracket that practically covered over 80% of professionals), led to a reduction in income tax by €1,300. Moreover, the solidarity levy was abolished for incomes over €12,000, while the tax deposit was reduced to 50%.

For example, a self-employed person with a net income of €10,000 paid €2,200 in taxes to the tax authorities in 2019. With the change in rates, the tax was reduced to €900; that is, the benefit reached €1,300. A professional with an income of €15,000 paid €3,366 tax, and with the change the tax was reduced to €2,000.

In contrast, those with incomes between €20,000 and €50,000, most of them salaried workers, saw charges reduced by just €17 per year. These employees are the ones who obviously have no way of evading taxes and therefore bear any fiscal adjustment.

Consequently the focus of the reforms in the next four years will be placed, according to a government source, on middle incomes, with a new reduction in social security contributions and in tax rates after the first steps. The abolition of the solidarity levy marginally eased taxation.

The middle-income class accounts for 15% of the total number of taxpayers and pays a total of more than €5 billion in taxes – i.e. more than 45% of the total personal income tax.

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