Corporate tax overhaul plans to spur growth

The government is planning a radical overhaul of corporate taxation in a bid to attract investment to Greece, rekindle growth and increase liquidity in the market, thereby rendering the country a much more competitive destination for investing.

The overhaul forms part of the new tax bill to be submitted by the Finance Ministry in September and will also include the lifting of a series of tax exemptions.

The plan for corporate taxation, according to recent statements by Deputy Finance Minister Giorgos Mavraganis, who is responsible for revenues, provides for the creation of a flat 20 percent corporate tax rate for all types of companies, which will later be further reduced to 15 percent. Corporate tax rates currently range between 25 and 45 percent.

The dividend tax for companies will go down from 25 percent today to 20 or even 15 percent — something which, along with the abolition of the practice of taxing half the net profits of small companies, is expected to render the country much more business-friendly than today.

However, speaking at the Athens Tax Forum organized on Friday by the American-Hellenic Chamber of Commerce, Mavraganis confirmed that a series of tax exemptions will be abolished, leaving intact only those that have been created for social reasons and only for those taxpayers who fulfill specific income and geographical criteria. That will be followed by a shift in income tax rates and brackets.

Among the exemptions set to go are those concerning indirect taxes for families with three or more children, the reduced value-added tax rates for various categories of products and services, and those for money spent on rent for homes, tuition fees, insurance premiums, medical costs, housing loan interest etc.

Nothing has been set in stone as the government intends to avoid hurting the most sensitive income and social groups and believes that providing benefits instead of tax exemptions is a fairer measure. Still, any tax exemption cuts implemented will certainly help the government in its negotiations on a number of other measures with its creditors.

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