The government is edging closer to the demands of the International Monetary Fund on the issue of the income tax-free threshold for salary workers, pensioners and farmers. Sources say that the Finance Ministry’s latest proposal, providing for the personal allowance to depend on the number of each taxpayer’s children, will be retained, but the tax-free level in each category will be brought down.
The government had originally proposed that the ceiling for three-child families be brought down to 9,100 euros in terms of annual income, for two-child households to 8,640 euros and for taxpayers without children to 8,182 euros. A ministry official now says that those thresholds have been brought down to get the IMF to issue its approval, at least on this matter.
This development is expected to lead to more taxpayers paying more tax as of next year compared to what they have paid to date. The amendment to the bill currently under debate in Parliament is expected to be submitted on Friday or Saturday at the latest. It is certain to generate protests from all sides of the House, because the reduction of the tax-free level will hurt the weakest income brackets.
The new set of tax rates incorporated in the bill provides for those with annual incomes up to 20,000 euros to pay 22 percent to the state, while incomes of more than 40,000 per annum will incur a tax bill of 45 percent.
The bill tabled in Parliament makes no reference to the indirect tax measures agreed with the country’s creditors and it remains unknown when they will reach the House. Some may be submitted in the form of an amendment.
The government has agreed with the creditors on the increase of the top value-added tax (VAT) rate from 23 to 24 percent, the rise in tax on unleaded gasoline and natural gas, the increase in the special consumption tax on tobacco and alcohol, the hike in registration fees for imported cars and road tax, the imposition of a levy on pay-TV and Internet use, and a charge on bank transactions and on hotel accommodation per night.