Finance Ministry examines solidarity levy reduction scenarios

Finance Ministry examines solidarity levy reduction scenarios

The Finance Ministry is considering various alternative scenarios for the upcoming reduction of the solidarity levy. According to a top ministry official, the fiscal leeway to emerge will determine not only the degree of the levy’s reduction but also the timing of its implementation.

For example, if the government saves 240 million euros for 2020, this could be used to cut the solidarity levy by 10 percent for 2019 incomes and by the same rate for 2020 incomes.

The final decisions will not be made before May 2020, when the government has a clearer picture of the course of next year’s budget – i.e. a few days before the submission and clearance of tax declarations for 2019 incomes.

Although Finance Minister Christos Staikouras has stated that nothing is certain yet, government sources stress that the solidarity levy will definitely be reduced next year; it just remains to be seen whether that cut will concern this year too.

According to the scenarios on the table, if the fiscal space to be secured reaches 240 million euros, it will be split evenly for the incomes of 2019 and 2020. If 360 million euros is saved, there will be a 10 percent reduction in the levy to be paid for 2019 (costing 120 million euros) and a 20 percent cut in the levy for 2020 (at a fiscal cost of almost 240 million).

In the event that the fiscal space available does not exceed 120 million euros, the reduction of the solidarity levy will only concern incomes in the second half of 2020, and will be implemented through the reduction of the monthly tax deductions from salaries and pensions.

The solidarity levy was introduced in 2011 as an extraordinary measure for incomes over 12,000 euros and was supposed to have been abolished by the end of 2014. Eight years on taxpayers pay a total of 1.2 billion euros per annum, down from 1.5 billion euros collected in 2014 when declared incomes were higher.

The likely reduction of the solidarity levy is set to ease the pressure mainly on middle income earners, who were forced to bear the brunt of the fiscal streamlining during the decade of the financial crisis.

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