Splitting social security contributions from income

Splitting social security contributions from income

The Labor Ministry is seriously considering the dissociation of the social security contributions calculation for 1.4 million freelance and self-employed professionals and farmers from their declared taxable income. Among the scenarios the special committee set up to draft a social security bill is examining is the creation of two or three social security brackets, along the lines which applied before the 2016 legislation, while there might also be an extra bracket too.

The government interventions have become necessary after the Council of State verdicts that rendered invalid several provisions of the 2016 legislation, known as the Katrougalos law. Minister Yiannis Vroutsis always expressed the view that the current system is not just unfair but also favors contribution dodging through the declaration of lower incomes.

Therefore the committee is planning to end the calculation of contributions according to taxable incomes, which the country’s highest administrative court considers unconstitutional. Plans center around the creation of two or three brackets with low and medium contributions, and possibly one with larger contributions that will be optional for the self-employed, as it would make a bigger dent in their monthly income but grant them higher pensions upon retiring.

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