Uncertainty on new tax system

Dimitris Mardas, a professor of economics at the Aristotle University of Thessaloniki, has been handed the hot potato of taxation, one of the main clashing points between SYRIZA and New Democracy in the pre-election period. The new alternate finance minister’s immediate task is to restructure the tax collection mechanism and pave the way for changes to property and income taxation.

This month’s budget revenues are at the top of Mardas’s agenda, as it is understood they are set to fall far short of the 4.5-billion-euro target.

The new government is planning to abolish the single property tax (ENFIA) and replace it with the so-called FAP tax and an across-the-board 30 percent reduction of objective values – used for tax purposes – although the tax exemption limit has not yet been determined.

From statements made by the ruling party it appears that main residences will be exempt from the new tax, except in the case of very expensive homes.

It seems that the new tax will mainly concern secondary and holiday homes, with SYRIZA officials saying the annual collection target will be in the range of 1.2-1.5 billion euros, which is 1.1-1.45 billion euros less than the ENFIA target.

The FAP exemption threshold will likely be 200,000 euros for properties owned by unmarried taxpayers, an amount which will rise depending on family status. Income levels may also be taken into account.

Regarding income tax, SYRIZA has promised to return the tax exemption level to 12,000 euros for everyone and to introduce different tax brackets. Party officials have recently said that the top rate for taxpayers could rise as high as 60 percent for annual incomes that exceed 80,000 euros. It is not yet clear whether the new brackets will concern 2015 incomes or next year’s.

The last time that incomes had a tax exemption rate of 12,000 was in 2011, concerning 2010 incomes. The top rate at the time stood at 45 percent for incomes in excess of 100,000 euros.