ECONOMY

Solidarity levy looks set to soar

solidarity-levy-looks-set-to-soar

The government’s inability to contain tax evasion – despite the cocky promises it made – are leading to a new avalanche of taxes on medium and high incomes. After the first shock from the new tax rates, which are still being discussed with the country’s creditors in the context of the bailout review, the second came with the new rates for the solidarity levy that target the same income brackets.

Both the new income tax rates and the solidarity levy rates will be confirmed after the return of the creditors’ representatives early next month. Until then, the technical experts will be processing the Greek proposals and will possibly submit their own to the Greek side.

The government’s plans essentially mean that most Greeks will in effect have to pay two types of income tax in 2016. The first set of rates concerns actual income tax, with earners of up to 20,000 euros per year paying a 22 percent tax, according to the latest scenario from the Finance Ministry. The top income bracket will be for those earning more than 40,000 euros per annum, who will pay a 45 percent tax. The second set of rates concerns the solidarity levy and will  feature a kind of tax-free threshold. So, if that threshold is set at 12,000, they would only be taxed on the income they make above that amount. The lowest level, expected to be for earnings up to 20,000 euros, will have a 2.2 percent rate. The top rate will rise from 8 percent today to 10 percent, concerning incomes in excess of 220,000 euros.

While people with incomes of up to 12,000 euros will pay no solidarity tax, the rate grows significantly above the 20,000 mark, with earners of up to 30,000 paying a 5 percent rate, climbing to 6.5 percent for those who make up to 40,000 euros, to 7.5 percent for incomes up to 65,000 euros and to 9 percent for those earning between 65,001 and 220,000 euros.

Therefore, a taxpayer who, for instance, earns 25,000 euros per year and until this year has paid 3,800 euros in income tax and 350 euros in solidarity tax, will now have to face a 4,350-euro income tax bill and a solidarity levy of 426 euros, i.e. 626 euros more in total.