Tax report out this week
The report of the committee assigned with the task of recommending reforms in income tax, which is to be released this week, seems to be attempting a tightrope act, as the endeavor faces strong objective difficulties that make its outcome uncertain. The headlong drive to increase revenues appears to have stilled the production of imaginative solutions which could have put taxation on a new footing. Essentially the report, of which Kathimerini has obtained an advance copy, once again recommends the intensification of efforts to stop tax evasion. According to the latest official data, in 2001 70 percent of trading and manufacturing enterprises declared incomes below 500,000 drachmas (1467 euros) and 90 percent below 2.5 million drachmas (7337 euros) – which is the tax-free threshold. Most taxes in Greece are paid by salary earners and pensioners, whose incomes are taxed at the source. According to the report, Greece has among the lowest taxation rates in Europe and the tendency is toward a further decline. New scale and rates The proposals have a dual aim; on one hand, to simplify the taxation system and (if possible) reduce the cost of managing it, and on the other, to facilitate the attraction of foreign investment. The recommendations include raising the lowest annual tax-free income bracket from 8,300 euros to between 10,500 and 11,700 euros; changing the tax scale and reducing rates; abolition of the use of certain criteria of living standards as a way to assume income, along with a series of tax exemptions; the future imposition of a tax on capital gains from shares; stricter treatment of offshore companies; abolition of tax deductibility for interest paid on first-time mortgages; abolition of the special tax treatment of parliamentary deputies and judges; and a 20 percent increase in rates on rented rooms and street market vendors. Specifically, the authors of the report propose: -That the present state of the stock market does not allow for any tax on capital gains but an eventual market recovery would favor it. -Retaining as tax deductibles medical and hospital expenses, social security contributions and life insurance premiums, and the abolition of most other family expenses, including part of private tuition fees and expenses for purchasing computers and installing household apparatuses. -Changing the tax treatment of families by adding incomes and dividing by the number of members. -Raising the lowest 5 percent income tax rate to 20 percent and reducing the highest from 40 to 38 or 35 percent. -Abolishing the obligation to file an income tax statement for a very large number of wage-earners and pensioners, and introducing a system for retaining tax at the source for all salaried incomes by one employer. Also, replacing the current practice of retaining tax at the source for the self-employed with advance payment of tax. -Abolishing the current system whereby criteria of living standards is used to assume income, which is costly to administer, but retaining those criteria concerning the acquisition of property assets. -Extending current legal provisions regarding artificially inflated or deflated invoices to offshore companies. -Replacing non-accounting methods for calculating incomes with book inspections to counter tax evasion. -Taxing construction companies on the basis of accounting results, and raising official real estate property values to approximate market values. -Retaining if not increasing the 15 percent tax on interest income, but also exempting a minimum amount or else introducing tax-free accounts. Also, abolishing uniform tax rates on incomes earned by foreign companies undertaking projects in Greece, and on elected local government officials and professional sportsmen and sportswomen. -Adopting new parameters allowing more accurate estimation of farmers’ incomes.
