“It’s a new dawn, it’s a new day, it’s a new life, for me. and I’m feeling good!” Nina Simone used to charm us with this wonderful song and the marvellous lyrics. But this is something the troubled Greeks cannot claim. On the contrary. With every new dawn, with every new day, they wake up to hear an additional tax is going to fall on their heads.
Greek media report on Wednesday morning that the Finance Minsitry considers to impose a poll tax of 1,000 euro to some 800,000 self-employed. This tax will be ’balanced’ with the flat tax of 35% the self-employed will have to pay most likely as of 2013, when the new taxation system will be implemented. Talks of the last days were claiming, that self-employed will be taxed with a flat 35% and thus from the first euro of their net income. The flat tax is claimed to part part of a tax system reforms that will also abolish any tax free amount for self-employed and freelancers.
Examples: Flat Tax & Poll Tax
A self-employed with 10,000 euro annual revenues will pay 3,500 euro (10,000×35%= 3,500 tax).
A self-employed with 2,000 euro annual revenues should pay 700 euro (2,000×35%=700 tax), With the poll tax, he will have to give additional 300 euro to the tax office to meet the 1,000-euro poll tax requirement.
The poll tax is thought to replace the annual trade fee of 500 euro. An “emergency tax” imposed for the economic years 2010 and 2011. As ‘emergency taxes’ cannot be implemented for more than two years otherwise they violate the Constitution, the trade fee should theoretically have to be abolished for the economic year 2012. It’s obvious that the Finance Ministry takes other options in consideration.
Apparently the new poll money targets to combat tax evasion, which is widespread among self-employed.
Self-employed as potential tax evaders
Thousands of registered self-employed were found to have declared in 2011 much lower revenues than theoretically possible.
457,389 out of the 779,316 self-employed declared to tax authorities less than 12,000 euro as annual income. In some sectors the income declarations urgently need psychiatric or criminal investigation:
- 14.715 hairdressers and owners of beauty parlours declared average annual income 3,916 euro.
- 30,197 bar owners declared an average annual income of 4,322 euro.
- 6,154 bakers declared an average annual income of 6,139 euro.
- 2,537 owners of hotels and rooms-to-let facilities declared 16,637 euro income per year.
Pharmacists, doctors, architects and owners of OPAP gambling shops declared more than 30,000 euro family income per year.
It is estimated that 9 out of 10 self-employed (almost 700,000 from a total of 779,316) declared family income less than 30,000 euro.
These data are published in an article about the allowances for families with children. I assume that they were given by the tax authorities. However they could also be controversial. For example, the income of a rooms-to-let owner is not unrealistic, then he traditionally rents one or two months per year.
Also the two women owning a hairdresser saloon in my neighborhood were complaining last year that after payments of rent, utilities and business-loan tranches, they would hardly bring home more than 300-400 euro per month. Both women were able to cover private expenses due to their husbands’ income.
Reactions to Poll-Tax & 35% Flat Tax
Both the 35% flat tax and the poll tax triggered angry reactions by self-employed who blame the state of ‘beating again’ the low and middle classes, giving bonuses to high earners.
- Introducing a flat tax of 35% means that lower incomes will have to pay more taxes while while higher incomes (75,00+, taxed with 40%) will pay less. Currently incomes between 45,000-74,000 euro pay 35% tax.
- Poll tax will hit low incomers as those paying more than 1,0001 euro in taxes will be freed from the trade fee of 500 euro.
It is claimed that the tax evaders declare average fictitious income of 3,500+, most likely of at least 5,000+. With the current taxation system incomes of 5,000 euro per year are tax exempted. However the tax free amount is expected to be abolished for self-employed with the new taxation system to be implemented in 2013.
- It seems that until now, real big tax evaders from the class of self-employed declare income of 20,000-30,000 euro in order to be covered with the “deemed income criteria”. But nevertheless the real income is much higher.
Many doubt that the poll tax will manage to convert a tax evader of the lawyer or doctor category to a sincere taxpayer. Their income declarations are ‘ficticious’ in many cases as they declare the minimum amount required for a taxed income.
And all agree that these measures would rather skyrocket tax evasion than combating it.
PS I don’t know if the flax tax and the poll tax will be implemented at the end of the Greece-Troika negotiations, but it has been massively reported in the Greek media.