The government is targeting a balanced budget for next year that will achieve the primary surplus target as well as increasing growth, reducing unemployment and providing the tax cuts promised, according to the first draft submitted on Monday in Parliament.
The Finance Ministry is aiming to achieve a growth rate of 2.8 percent, up from an estimated 2 percent this year (1.5 percent in the first half), along with a jobless rate reduction to 15.6 percent from 17.4 percent this year, while the primary surplus is seen coming to 3.56 percent of gross domestic product and the new social measures – mostly tax cuts – to 1.2 billion euros.
The draft budget also provides for a 5.1 percent yearly rise in exports of goods and services and 5.2 percent growth in imports. Private consumption is seen advancing by 1.8 percent and investment by 13.4 percent, after projected growth of 8.8 percent this year, although investments increased just 1.2 percent in the January-June period.
The tax cuts planned concern a series of measures that will see all taxpayers paying less tax next year. This is because the basic rate for yearly incomes up to 10,000 euros will shrink from 22 to 9 percent, which will also concern the first 10,000 euros of income in excess of that annual amount. However, the tax-free threshold of 8,636 euros will require some 30 percent more online transactions.
Furthermore, the government will hand out 2,000 euros for every child born from January 1, 2020, with the criteria covering some 90 percent of families. Baby goods as well as helmets for all motorcycle riders will see their value-added tax rate drop from 24 to 13 percent.
Full-time employees will also have one percentage points slashed from their social security contributions. Other sweeping measures, affecting all companies, include the reduction of corporate tax from 28 to 24 percent as of the current financial year, and the halving of the tax on distributed profits from 10 to 5 percent. The VAT on new buildings and the capital gains tax on properties are suspended.