The Inner Cabinet yesterday approved the Finance Ministry’s tax reform plan which will lift the tax-free threshold by 1,000 euros and provide relief for middle-income earners over the next three years. Finance Minister Giorgos Alogoskoufis said the changes will not lead to any widening of the budget deficit as the lost revenues will be offset by stricter supervision of public finances. «The cost of the tax reforms is included in the 2007 budget estimates. The tax cuts will be paid for by restraint in public spending and better tackling of tax evasion,» he said. The tax-free threshold will be raised from 11,000 to 12,000 euros as of next year and will enable more than 3 million Greeks to not pay any taxes, Alogoskoufis said. Taxpayers earning up to 30,000 euros per year will be among the winners, according to government estimates. Their tax rate will drop to 29 percent next year from 30 percent currently and will then further drop to 27 percent in 2008, the year the conservative government’s four-year term expires. In 2009, the tax rate is planned to drop to 25 percent. The reforms also include other measures, ranging from tax relief for disabled people and large families to lower taxes on home renovations and inheritances. The changes are the second in a series of modifications to the tax system implemented by the Finance Ministry. The government has announced that it will cut the corporate tax rate from 35 percent last year to 25 percent in 2007. Government spokesman Theodoros Roussopoulos said yesterday that the reform will help to simplify the tax system. «The keystone of the policy is to reduce the weight on taxpayers and simplify and update the system in order to boost transparency and reduce bureaucratic procedures,» said Roussopoulos. Greece’s tax system has been described by foreign experts as among the most complicated in the European Union. The legislation outlining the reforms will be presented to Parliament next week.