Tax breaks rethought

The government is studying improvements to its recently announced changes in the scale of income tax rates to start next year, sources say. The meager effect of the minor tax breaks announced for pensioners and single-salary earners of between 13,000 and 23,000 euros as well as the new burdens of some self-employed professionals are prompting the government to reconsider the measures. However, it does not intend to upset its policy of moderate fiscal adjustment. According to the changes announced so far, the new scale for 2007 incomes particularly favors those earning above 23,000 euros and families with two or more children. For instance, someone earning 30,000 euros will pay 880 euros less in taxes. In contrast, those earning up to 15,000 euros will gain 30 euros more than they did before. It is such discrepancies that the Finance Ministry wants to correct, especially after calls by top political cadres in the ruling party. Ceiling changes The proposed new tax scale envisages a raising of the tax-free income tax ceiling from 11,000 to 12,000 euros for salary earners and pensioners, and from 9,500 to 10,500 euros for all other categories of taxpayers. The tax-free ceiling is raised to 13,000 euros for families with one child, to 14,000 euros for families with two children and to 22,000 euros for those with three children. For every child after the third, the tax-free ceiling is raised by 1,000 euros. The 30 percent rate for the remaining segment of incomes up to 30,000 euros is cut to 29 percent, and between 30,001 and 100,000 the rate will be 39 percent. Incomes above that will be taxed at 40 percent. The 15 percent rate for the 13,000-21,000 euro bracket will be abolished. Further 1,000-euro increments to the tax-free ceiling are planned for the two following years, 2008 and 2009. Ministry officials are now suggesting the reinstatement of the 15 percent rate so as to prevent burdening the low incomes in that bracket. Other proposals refer to tax breaks for specific income brackets of salary earners and pensioners. The ministry has put the cost of the initially proposed package for the three years at 1.25 billion euros and estimates that in 2007 the raising of all brackets by 1,000 euros will mean that more than 3.4 million taxpayers will pay no taxes.

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