The Greek government aims to get additional 400 million euro revenues from taxes alone in the current year. But where it will get them from? From the better-earners. Therefore it reportedly submitted a groundbreaking proposal to the country’s creditors: taxation of 50% for those ‘natural persons’ – i.e. employees – with 50,000-60,000 euro annual income, the Greek media have been reporting since Tuesday evening.
As lenders and borrowers are currently negotiating the Greek program review in Athens, creditors’ representatives and Greek officials are working out the new taxation system.
The new taxation system plan will reportedly provide new multi-speed tax categories that will not burden with additional taxes the low and middle incomes up to 30,000 euro per year.
According to information, the proposal provides that the maximum tax rate for personal income tax rises to 50% for incomes above 50,000 or 60,000 euros. This combined with the extraordinary contribution brings the taxation even 55% for certain categories of taxpayers with very high incomes.
The new taxation system is expected to have 5 to 6 categories with the lowest tax rate (for incomes up to 12,000-15,000 euro) to be around 15% or even 10% and the highest tax rate to be 50% for incomes of 50,000-60,000 euro.
Of course – and despite to what is been reported by the Greek mainstream media and websites – this 50% will not be applied to the whole income but only to the different category of income.
if
| Annual income/euro | Tax rate |
| up to 25,000 | 22% |
| 25,001-42,000 | 32% |
| 42,001-50,000 | 42% |
| 50,000/60,000+ | 50% |
then 32% will apply for 23,000 euro and the 50% will apply for 8,000 euro.
The Greek proposal does not include tax-breaks or provisions/changes for the solidarity tax, therefore the tax burden could be some 5% higher. The Greek proposal also did not include provisions for self-employed and freelancers who get taxed form the first euro with 26%. The taxation of this group is expected to be dealt with separately in a “second phase of negotiations with creditors”.
Currently the government is under pressure due to its social security contributions hikes, with the whole spectrum of the private and public sector to organize fierce protests and the farmers to be blocking highways and customs crossings.
Despite the protests, it is the budget 2016 that shows the way of tax collection to the government: increased revenues from taxes of ‘natural persons’ at 150 million euro and additional revenues form income from rents at 140 million euro.
The new taxation will apply for the incomes of 2016 and the tax declarations of 2017. However, the monthly tax withheld from wages and pensions will be applied in 2016 and will increase the tax revenues immediately.
Pending is still the issue of the ‘solidarity tax’ that was supposed to be integrated in the taxation category, according to the third Memorandum of Understanding. The ‘solidarity tax‘ brings one billion euro on annual basis and with the latest loan agreement it provides the lowest rate to be 0.7% for annual incomes 12,001-20,000 euro and the highest 8% for incomes over 500,001 euro.
It is logical that one asks whether there are employees with more than 50,000-60,000 euro annual income (4,000-5,000 euro per month) in Greece of austerity and recession. Of course, they are: company board members, bankers, high-ranking officials in state-run enterprises, etc etc in a society of free economy, lawmakers. Ops! the last category to be a special kind of ’employees’ with tailored-made benefits and tax-breaks.
side note: if 60K-incomes pay 50% tax then 500K-incomes should pay 150% in taxes, not?
PS the main problem in this country is to have to change the taxation system on an annual basis. It has changed 6 times since 2010. This is the top reason for the economic instability that scares investors to death.
