Factbox: Greece legislates bailout reforms to get loans, debt relief
Greek lawmakers approved on Sunday a bill which increases taxes, sets up a new privatization fund and frees up the sale of bank non-performing loans to help unlock fresh bailout funds and debt relief.
Here are key points of the reforms approved with a majority by the Greek parliament.
Tax
Indirect tax measures aimed at raising 1.8 billion euros or 1 percent of GDP up to 2018
– Increases value added tax to 24 from 23 percent and puts a levy on beer from June. Raises taxation on gross gaming revenues by five percentage points to 35 percent.
– Extends the unpopular real estate tax ENFIA.
– Adds tax on fuel from October. Introduces tax on satellite TV, telephone charges and coffee and increases tax on tobacco from 2017.
– Increases tax on hotels from 2018.
Non-performing loans
Frees up sale of bad loans, except those with first homes and whose collateral is valued at up to 140,000 euros.
Privatization fund
Sets up a new privatization fund, which will be operational within 2016 for 99 years. Half of the fund's revenues will be used to pay off public debt and the rest will go to growth investments.
Contingency mechanism
Legislates a contingency mechanism which will be activated only if Athens misses its bailout fiscal targets. It will automatically impose spending cuts up to 2 percent of economic output, depending on the projected fiscal shortfall.
Eurostat data will determine whether the mechanism will be triggered. Greece has agreed to achieve a 3.5 percent primary surplus – which excludes debt servicing costs – in 2018.
Greece approved another set of tax and pension reforms earlier this month. Here are some of the key measures:
Pensions
Introduces unified retirement rules and a national pension at 384 euros, cuts supplementary pensions, gradually phases out a top-up stipend for pensioners now on lower incomes and recalculates other pensions. It also tightens rules on widower or legacy pensions and readjusts replacement rates to curb early retirement.
The target is to reduce pension spending by about two percentage points to around 15 percent of GDP by 2019.
Social security
Sets social security contributions for main pensions at 20 percent of employees' net monthly income, with 13.3 percent burdening employers and 6.7 percent employees.
Reforms the social security contribution base from notional to actual incomes for the self-employed, including farmers and lawyers, forcing them to make a contribution to pension funds which is phased in over a five-year period to 20 percent of their income, instead of a fixed monthly amount currently paid.
Taxes
– Income Tax: Target is to raise another 1.8 billion euros up to 2018.
Lowers the income tax-free threshold, or personal allowance, to an average of around 8,800 euros a year from around 9,500. Makes income bands narrower and increases tax coefficients. Lowest tax band is now 22 percent on a gross income of 20,000 euros a year compared to the 22 percent for 25,000 euros rate that existed previously.
The upper tax band of 45 percent is now imposed on gross incomes exceeding 40,000 euros as opposed to 42 percent on income above 42,000 euros under the previous arrangement.
Includes EU farming subsidies on taxable income.
– Solidarity Levy : First introduced in 2012, the rationale was to assist Greece's army of unemployed.
The levy on net incomes ranges from the lowest 2.2 percent on incomes from 12,000 euros to 20,000 euros a year, to 5.0 percent up to 30,000 euros, and 6.5 percent up to 40,000 euros. The highest band is 10 percent on incomes above 220,000 euros.
By comparison, the highest band in that category was 8.0 percent before the new reform was pushed through on earnings exceeding half a million euros.
– Dividends Tax: Increases to 15 percent from 10 percent.
