ECONOMY

Possible rise in card transactions demanded for tax-free threshold

possible-rise-in-card-transactions-demanded-for-tax-free-threshold

The Finance Ministry is examining alternative scenarios concerning the tax-free limit in case talks with the country’s creditors do not end up in an agreement on the cost of the measures and on whether the primary budget surplus of 3.5 percent of the gross domestic product can be achieved in 2020.

The government’s intention is to keep the tax-free threshold at its current level of 8,636 euros of annual income, and the ministry is seeking complex proposals to put to the creditors that will also contribute toward containing tax evasion.

The ministry’s contingency plan provides for a fixed tax-free threshold of 6,500 euros per year, rising to 8,636 euros if a taxpayer presents additional online transactions to the tax authorities through bank data. Therefore, in future, for taxpayers to benefit from the tax-free level as it stands today, they will need to conduct more card payments than in 2019. This way, the ministry expects that the budget balance will not be upset, and that the creditors will be persuaded the threshold can remain at its current level while combating tax evasion, mainly in the domain of value-added tax, where it exceeds 6 billion euros per annum.

The fixed right to a tax-free amount of 6,500 euros in annual income terms will be secured for incomes up to 10,000 euros with 10 percent of that paid online, for incomes between 10,001 and 30,000 euros with 15 percent in online transactions, and for incomes in excess of 30,000 euros with card payments amounting to at least 20 percent of earnings.

The increased tax-free ceiling of 8,636 euros will require additional online transactions to those required for the fixed tax-free amount. The level of the additional requirements will be decided next year if the government cannot keep the existing tax-free ceiling as it now is.

Still, the actual amount of card transactions each taxpayer makes is currently at least twice the minimum requirement today for the tax-free ceiling, so most households will easily clear the raised bar the government is considering if it is forced to resort to this solution by the creditors.

Bear in mind the government also intends to raise the tax-free ceiling for taxpayers with one child to 9,636 euros, from 8,864 euros today, and for two-children households to 10,636 euros, from 9,090 euros today.