Tax revenues to rise by 15% in 2021

Tax revenues to rise by 15% in 2021

Tax revenues will grow by 6-7 billion euros next year, according to the target included in the first draft of the 2021 budget the Finance Ministry is set to submit to Parliament on Monday, government sources have told Kathimerini.

The challenge for the government is to achieve that 15% increase in tax takings the above target would require by using lower tax rates, which will also apply to the lowest declared annual incomes of the last 15 years, due to the pandemic.

Therefore the course of tax revenues is largely in uncharted territory: In 2020 there will be the biggest slump recorded in recent years, as with the freeze on payments, the reduction in the corporate income tax deposit, the lockdown and tanking tourism revenues, tax takings are projected to drop to just €44 billion this year against a target for €52 billion; this will be the lowest collection of tax revenues since 2006.

The expected rise in tax revenues by €6-7 billion – i.e. the biggest increase in the last 20 years – will come from three sources. The first concerns the strong recovery of gross domestic product through the rebound of tourism (expected to regain about 60% of the ground lost since 2019) and the inflow of funds from the European Union. This rebound is largely expected to be reflected in indirect taxation, with a rise in takings from value-added tax and consumption taxes – barring a second lockdown.

The second source of growth in tax takings will be the easing of the 2021 budget from tax rebates amounting to some €1.5 billion that will not be paid out due to the reduction of the corporate tax deposit this year.

As for the third source, this concerns the suspension of tax obligations from this year until April 2021 and the announcement for their payment in 12 or 24 monthly tranches from May 2021, which will endow next year’s budget with revenues stemming from this year too.

Therefore if there is no new resurgence of the coronavirus in 2021, tax revenues are projected to reach €50 billion.

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