The new tax bill submitted for public consultation on Thursday contains some very favorable provisions for corporations, which will see their taxes slashed by about 30 percent next year.
The reduction of their income tax rate from 28 to 24 percent, the decrease of the tax deposit from 100 to 95 percent and the halving of the dividend tax from 10 to 5 percent will lead to a significant drop in dues, which combined with other measures in the bill should contribute considerably toward accelerating Greece’s growth rate.
The reduction of the tax deposit to 95 percent may be a one-off measure for 2020 alone, but the government has already announced that if the fiscal space exceeds expectations next year, it will be used for the reduction of the levy to practice a profession or for the reduction of the tax deposit.
For this year a corporation with annual profits of 100,000 euros will pay taxes of 30,000 euros (including the tax deposit paid last year, the levy for the profession etc). The same company with the same profits will pay taxes of just 21,450 euros in 2020 – i.e. 28.5 percent less.
Market professionals note that the benefit for all corporations will amount to 1.3 billion euros over the next couple of years, as in 2020 the government is planning to further reduce the corporate tax from 24 to 20 percent. This incentive combined with the reduction in the dividend tax will lead to enterprises posting higher profits and will enable them to invest in their businesses in order to augment their earnings. This development is certain to have a positive impact on the labor market and to boost the growth rate from last year’s relatively slow 1.4 percent.
In contrast to the international trend, Greece has introduced big increases in taxes and social security contributions over the last couple of years, and ranks top in terms of tax hikes among the 34 member-states of the Organization for Economic Cooperation and Development (OECD). Over the last decade most other countries have been implementing tax cuts for corporations, while Greece has raised its rate by three percentage points.