Finance Ministry set to overhaul tax scales, rates

The governmentis planning extensive changes in taxation, including raising the tax-free ceiling and a greater differentiation in the income tax scale, with a view to lessening the burden on the lower-income brackets, sources say. The overhaul of the scale will cost public coffers an estimated 400 million euros, which will be offset by the abolition of several tax exemptions for the upper-income brackets. The sources say the draft document of instructions to the committee which will study the reform is ready and also provides for the abolition of special tax scales for certain categories of taxpayers and of assets as evidence of presumed income, and for a reduction in company taxation. At the same time, the overhauled income tax scale will include a reduction in the top rate from 40 percent to 37 percent, and will attempt to minimize disproportionate losses of income when taxpayers move up income categories. Finance Ministry officials say the special tax scales must be restricted to the minimum and be abolished for foreign construction companies, payments to football and basketball players and members of national sports teams, and for elected local government officials. By contrast, they say the special low scales will be maintained for all interest income to individuals and for the proceeds from the sale of businesses or shares in them. The rate on undistributed company profits will be reduced from 35 percent to 25 percent and is likely to apply for the 2004 fiscal year. The abolition of exemptions for first homes and dependents’ rentals, private tuition fees and a number of consumer expenses is being studied. The ministry is also said to favor raising the tax-free ceiling for parental transfers of property to offspring, which would virtually make the rates equal to those for donations.

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