Bill to launch tax rate cuts in September

The government is planning to extend the considerable reductions in income tax it has already announced for salary earners and pensioners over the next three years to freelancing professionals, farmers and property owners, sources say. The new draft taxation bill, which is to be submitted to Parliament in September, will provide for extensive changes to income tax scales for all categories of taxpayers, resulting in a considerable reduction of the tax burden for about 6 million people. The Finance Ministry has already announced that the reduction in tax rates will take place gradually in the 2007-2009 period, accompanied by a widening of the bracket to which the main rate applies. However some reductions may be accelerated given that public revenues, at least at this stage, are increasing rapidly, while some more amounts will be added thanks to the change in the way defense expenditure is recorded. These developments may change the general plans of the ministry and the tax reform may be realized in two stages, starting next year. Even in a three-year period, though, the benefits from the gradual tax rate reduction will be significant for all income brackets. Salaried workers and pensioners will see their tax-free ceiling rise from 11,000 euros today to 12,000 euros next year, and their tax rate drop by one or two percentage points. In 2008 the reduction will also be by one or two percentage points and in 2009 the rates will come to 35 and 25 percent. For freelance professionals the tax-free ceiling will rise to 11,000 euros in 2009 and rates will also be reduced to 25 and 35 percent. On both scales the main rate of 25 percent will concern incomes up to 50,000 euros. Sources suggest that in 2007 rates for freelancers and the other profession categories will remain at the same levels, and only their tax-free ceiling will go up. Changes in the tax rates will not happen before 2008. Families with three or more children will particularly benefit, as the tax-free ceiling will rise and new tax exemptions will be passed for three-child families. The Finance Ministry is also considering extending the third-child allowance beyond the child’s sixth year of age. The tax-free ceiling of the first scale for families of salary-earners and pensioners with one child will come to 13,000 euros, for two-child families to 14,000 euros and for three-child families to 22,000 euros. For every additional child beyond the third the tax-free ceiling will rise by 1,000 euros.