ECONOMY

Budget calls for cuts in individuals’ tax rates

The 2007 budget, submitted to Parliament yesterday, provides for significant tax reductions for both individual taxpayers and corporations. According to the introductory report to the budget, presented by Economy and Finance Minister Giorgos Alogoskoufis, the non-taxed portion of individual income will be increased, a more lenient approach will be adopted toward those owing the state relatively small sums and there will be a significant reduction in the taxation of non-invested corporate cash reserves. Regarding income tax rates, the 2007 budget makes the following changes: – The non-taxed portion of income for salaried employees and pensioners increases to 12,000 euros from 11,000 previously. Similarly, it increases to 10,500 euros from 9,000 euros for self-employed professionals and farmers. – The portion of income ranging from 12,001 (or 10,501) to 30,000 euros is taxed at 29 percent, from 30,001 to 75,000 euros at 39 percent and from 75,001 euros upward at the top rate of 40 percent. In 2009, the 29 percent rate will drop to 25 percent and the 39 percent rate to 35 percent. These changes will be included in the upcoming tax bill, which will also abolish income tax on the subsidy given to mothers of more than four children. The tax bill will also include a provision abolishing the 3 percent stamp duty on rent. This will benefit some 800,000 people, while the state will lose some 150 million euros in revenues. The budget also calls for measures to benefit people with special needs. The deductible amount from their incomes for various expenses is raised from 1,900 to 2,400 euros, while value-added tax (VAT) on devices used specifically by people with special needs is reduced from 19 to 9 percent. The new tax bill will also abolish the provision that enabled the state to withhold up to 600 euros per month from salaries or pensions in the event the employee or pensioner owed back taxes. People owing taxes will also be able, beginning in the new year, to settle their debts in more than the three installments provided for up to now. Provisions for firms The tax bill will also reduce taxation for enterprises with cash reserves. These were untaxed if used for investments but heavily taxed if distributed to shareholders. Companies listed on the Athens Stock Exchange will be taxed at 6 percent, while other firms will pay a 12 percent tax. There is a problem with the European Union, however, which has declared that non-taxed cash reserves are illegal because they are considered a form of state subsidy. There will also be changes in the taxation of construction firms after the imposition of VAT on new buildings. They will be taxed at a minimum of 15 percent for their gross income. This will extend to companies selling new buildings and those involved in other technical projects.