Next year’s budget seen coming with higher property taxes, lower VAT, fewer tax breaks
The government?s overhauled national taxation system, which is expected to be submitted to Parliament next month along with the 2012 draft budget, will include a new model for the collection of taxes and drastic cuts in tax exemptions.
Finance Minister Evangelos Venizelos has said that the new system will redress existing inequities, emphasizing that without proper control mechanisms the country will remain trapped in a vicious cycle along with the underground economy and tax evasion that make tax cuts impossible.
The government is also under strong fiscal pressure from its international creditors, so the 2012 budget can be expected to come with more new taxes.
The separate taxation of incomes from property, a new tax scale, increases in property values officially determined for tax purposes, and a hike in the stock market transaction tax are among the measures considered most likely:
1. The number of brackets in the new tax scale will be reduced from 10 to six or eight, and will be more progressively rated for incomes between 30,000 and 40,000 euros.
2. Officially determined property values are seen going up by more than 30 percent. The 23 percent value-added tax for newly built houses may be reduced in a bid to aid the recovery of the construction sector. At the same time, however, a hike in property taxes is being considered, along with a stamp duty on rents.
3. Cuts in tax breaks for the lower income brackets and their full abolition for higher incomes. These currently cost the state budget about 8 billion euros and the aim is to bring it down to about 4 billion. According to reports, the Finance Ministry is re-examining deductibles for medical and hospital expenses, mortgage loan interest, insurance premiums, social security contributions, business expenses and tax breaks for parental property transfers. The waiving of the deductibles is said to be graded, starting from incomes of 30,000 and completely abolished for those over 60,000-70,000 euros.
4. The Finance Ministry is studying criteria for the indirect calculation of the incomes of about 800,000 self-employed professionals and traders. Such incomes will be determined on the basis of the kind of activity, the area where the business is based, the number of staff and their remuneration. It is also looking into the payment of VAT on a monthly rather than three-monthly basis.
5. There will be corrections in car circulation taxes and the ministry is studying the abolition of the luxury tax on expensive cars.
6. An issue of concern, following strong reactions in the marketplace, is that of VAT. It is considered very likely that the top 23 percent rate will be cut to 20 percent, in the hope of leading to price reductions in various products and services, such as catering, fuels, clothing and footwear, and mobile telephony bills.
