Gov’t plans to halve the solidarity levy

Gov’t plans to halve the solidarity levy

The Prime Minister’s Office is about to decide on a generous cut to the solidarity levy for 2021 so as to support households with significant problems owing to the new crisis. At the same time social security contributions will be reduced to boost entrepreneurship and employment.

The interventions to take place will exclusively concern 2021, as they will form part of the measures to contain the impact of the coronavirus pandemic on the economy and maintain the country’s social fabric. Nevertheless, if the pandemic crisis ends next year, the reductions will take on a permanent character.

Sources say that the amount the state coffers take in every year from the solidarity levy will be cut in half – i.e. from 1.2 billion euros to €600 million.

The government is considering two options: The first will see a horizontal 50% cut in the levy for all incomes as of January 1, 2021, and the second provides for the abolition of the levy for incomes up to €25,000 or €30,000 per year, against the current threshold of €12,000, along with the reduction by one or two percentage points of rates in higher income brackets.

Government sources reveal that both interventions have already been discussed with the country’s creditors, and note that the €600 million to be saved will go toward consumption and supporting employment.

Unless the health crisis deteriorates, forcing the government to spend more funds on shielding the economy from the pandemic’s impact, salary workers and pensioners will experience the difference in their deductions from this January, while freelance professionals will have to wait till 2022.

The plan for 2021 also provides for a double reduction in social security contributions; instead of rates being slashed by one percentage points, this will be by two points next year, with the cost for the state estimated at €800 million on an annual basis.

The contribution rate cut will also be included in the plan the government will forward to the European Commission in October.

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