Plans to cut solidarity tax by 30 percent, not 50 pct, in 2015

The government will only reduce the so-called solidarity tax by 30 percent and not 50 percent for 2015, as the Finance Ministry fears that the higher fiscal costs will run into opposition from the country’s creditors, known as the troika.

According to ministry officials, the creditor representatives have not yet given their consent for the reduction of the solidarity tax, which constitutes a levy ranging from 1 to 4 percent of taxpayers’ annual incomes. The government will try to sway the troika’s opinion during negotiations set to start later this month.

The ministry plans to argue that considering the solidarity levy contributed some 1.4 billion euros to the budget in 2013, a 30 percent reduction would bring revenues to about 1 billion euros, which would go a long way toward plugging the hole in the 2015 budget (originally the solidarity tax was not supposed to continue into next year as it was an extraordinary measure).

Greece’s creditors say that the fiscal gap next year will come to 2 billion euros, but this figure is based on the supposition that there wouldn’t be a solidarity tax. Given that the takings of the tax are divided between the year they are collected and the next, the 30 percent discount on the levy would add some 500 million euros to 2015 revenues.

The same ministry officials argue that you can’t just throw away the chance to collect revenues of 1.4 billion euros within a year or two. Such moves must be implemented gradually, they say, and replaced by revenues from other sources, such as broadening the tax base without any new measures, combating tax evasion and creating a tax model that will remain fixed for years to come.

They add that the new changes announced by the prime minister concerning the extension of the installments for the single property tax (ENFIA) and for the repayment of expired debts will create problems in this year’s budget as well as to that of 2015, leading to a temporary drop in revenues from the above sources.

The plan is for taxpayers in the annual income bracket of 12,000 to 20,000 euros to pay 0.7 percent of their income as solidarity tax next year (from 1 percent in 2014), for incomes of 20,000-50,000 euros to pay 1.4 percent (from 2 percent), for those earning 50,000 to 100,000 euros to pay 2.1 percent (from 3 percent) and for people earning over 100,000 to pay 2.8 percent (against 4 percent today).

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