ECONOMY

Toward a flat 25-percent tax?

Economy and Finance Minister Giorgos Alogoskoufis yesterday said his government intends to gradually reduce the top tax rate from 40 to 25 percent, beginning in 2007. Although Alogoskoufis promised a «specific timetable,» he did not produce any yesterday. According to government officials, the timetable will be finalized by the time the government submits the 2006 budget, in October, unless it is announced in advance by Prime Minister Costas Karamanlis at next month’s Thessaloniki International Fair. It has long been speculated that the government was moving in that direction, although it had been said that it was considering a single tax rate at 25 percent, along with a rise in the tax-exempt portion of income from 11,000 to 13,000 euros. This measure will benefit middle-income wage-earners, as, according to the current system, the top rate is applied to incomes exceeding 23,000 euros, considered by most to be a very low ceiling. With this measure, which will eventually equalize personal and corporate taxes at 25 percent, Greece will be moving toward a low-tax regime more common among the Eastern European countries, many of which joined the European Union in May 2004. Some of them have tax rates even lower than 25 percent. The EU’s big nations, especially France and Germany have attacked this low-tax trend, especially in corporate taxation, arguing that it is aimed at shifting jobs away from them and saying that these countries cannot expect to be the recipients of EU funds at the same time. It seems, however, that a shift may occur soon in Western Europe as well. Leading German conservatives voiced support yesterday for appointing radical tax reform advocate and political novice Paul Kirchhof as finance minister if they win a September 18 election. Kirchhof, a Heidelberg University professor and former constitutional court judge who has no party affiliation, was named as conservative leader Angela Merkel’s top finance adviser on Wednesday. He is best known for a tax reform proposal he presented in 2003 which calls for a flat 25 percent tax for corporations and individuals. But economists, fellow academics and opposition leaders have said he lacks the political experience and party network to do the Finance Ministry job that influential Bavarian Premier Edmund Stoiber or the Free Democrats (FDP) could try to lay claim to if Merkel’s Christian Democrats (CDU) are victorious. (Kathimerini/Reuters)