Are you alive and happen to live in Greece? You will be taxed even if your income is zero for the sole reason that you are alive. For the exclusive and amazing Greek air you are allowed to breath, so to say. The financial ministry has calculated that every person living in Greece needs 250 euro per month – ie. 62.5 euro per week or even 2.1 euro per day – to literally feed the “status” of being alive. That is the Greek finance ministry calculates that one person needs 3,000 euro per year to eat and maybe buy shampoo, wash his clothes and other daily personal activities.
With the new taxation law applied for the first time this year, millions of taxpayers will be called to pay taxes even if they have no income, but they are alive and have a home to live in. If they are fool enough to own also a car, not matter if permanently parked in the garage, they will be confronted with a taxable income they do not have in real life.
Two key features of the new taxation system that will apply this year for income of 2012 are:
1) Mandatory tax declaration for all adults – except dependent children -, even though the income of 2012 was poor or zero!
2) The minimum cost of living of 3,000 euro per year will apply to all taxpayers -irrespectively of real income in 2012 – just because they live!
The unlucky home-owner will be stunned to see he needed several thousands euro in 2012 to pay home expenses. And the car owner will realize, he needed more money to maintain a car of 1200cc that a flat of 60 square meters.
It makes no difference if the real-life home-owner has a mountain of unpaid utility bills and spent the winter without heating. If also makes no difference if the car-owner keeps the vehicle in the parking slot and uses it only for emergency situations.
The arm of taxman will fall heavy on the taxpayers’ shoulder and dig deep in his empty pocket and wallet. Because the Greek finance ministry calculates in 2013 income taxes for 2012 according to deemed income, imputed income or in simple English “an assumed income regardless of the real income.”
Apart from the deemed income to cover basic cost of living, additional imputed income criteria will be added for homes and vehicles, swimming pools and boats. The taxpayer will be surprised to see that money to pay back loan installments, pay private school for children or pay wages for a caretaker or household help will skyrocket the taxable income.
Soup Kitchen meets the taxman
In addition to assumed cost of living of 3,000 euro (5,000 for couples), deemed income criteria for home and cars look like that:
1) Home: According to Troika-bound Greek finance ministry, if the owner of a home up to 60 square meters, needs 2,400 euro per year . That is 120 euro per month to pay in utilities etc. Of course, if the home is 80 sqm assumed expenses are calculated at 3,200 euro, if it’s 100 sqm at 4,500 euro etc.
2) Private car: the car owner will see another bunch of euro will be added to his deemed income: 4,000 euro annual expenses for a vehicle as small as 1200 cc. The list is long according to “cc”. See link below.
The finance ministry considers that if a taxpayer rules over all these luxury possessions (air to breath and food to eat, a small flat and a small car) the taxpayer would need at least 9,400 euro annual income.
Furthermore, the taxpayer will have to prove that 25% of the fictive income was indeed spent, so the state could collect Value Added Tax and the government can claim that the real economy has not collapsed. Therefore, the taxpayer has to have collected receipts worth 2,700 euro (but utilities excluded!) otherwise he will be fined with another 10% extra tax.
According to this unprecedented assumed calculation of the fictive income the taxpayer may not have, he will be taxed even if the real income is zero and the local EU citizen manages to cover basic needs through on borrowed money by friends and relatives or even donors.
One has just to think of all those people seeking a meal at the soup kitchens. And, yes, some of them may own a flat but are without a job and income and are unable to cover their basic needs.
Fiction meets Reality
The Greek finance ministry asks taxes even if the real income is below the official EU poverty threshold of 6,000 euro per year. Which translates into a 500 euro available amount per month.
Taxes are due even if the austerity- and recession-hit Greek simply sink in debts and he owes money even to the feral cats in his neighborhood.
The finance ministry justifies this ‘deemed income’ taxation scheme with the declared fight “to tackle tax evasion”. The real reason however is to strip even the needy ones from their last euro because the Greek state needs revenues.
Taxing just the real income would allow those with tax-free threshold of 5,000 euro or zero euro income to escape paying taxes. The imputed income of fictitious maintenance cost for home and car skyrockets the income one may do not have – at least on the paper.
Furthermore, the surreal state we live in demands that you pay double and triple taxes for the same assets you own: property and car.
All these genius work-out calculations of fictive income will trap about 2.4 million taxpayers with annual income below the tax-free threshold of 5,000 euro.
Interesting findings from deemed income calculations
1) car maintenance costs more than home maintenance.
2) over-taxation: while indirect tax (V.A.T.) and direct taxes are paid for food, utilities, property and vehicle ownership are paid, the finance ministry demands additional taxes for the same items.
3) the minimum wage of 580 and 510 euro gross per month introduced by the Troika/Greek government is lower than what is considered as poverty threshold by the EU (6,000 euro) and very slightly higher than the tax-free threshold of 5,000 euro.
4) With the deemed income criteria, the state admits that the minimum wage of 580 and 510 euro gross per month does not allow somebody to cover even basic needs for food, utilities and a roof over the head.
Next taxation system in 2014
While the number of unemployed exceeds 1.3 million people, the new system will force many of them pay income taxes even if they had no income in 2012.
365 days from now, in May 2014, a new new taxation system will apply for the income of 2013 and thus eliminating the tax-free threshold of 5,000 euro. Maybe by then, the 1.3 million unemployed have found a job…
KTG-readers from Ireland have informed me that taxation based on “deemed income” was ruled as against the Constitution. The Irish Constitution. But Greece is not Ireland, Spain is not Portugal and so on.
PS With such taxation injustice based on the fiction scripts put down together by local and international technocrats , I do not wonder anymore why I hear from more and more people, that they leave their bills (loans, rent, utilities, taxes,) rest in peace at the back corner of a dusty drawer. I also do not wonder anymore that the real economy has collapsed and nothing moves in the market.
List with details of “deemed income” criteria here but in Greek.