Greece tackles notorious tax blackhole by slapping €2.5bn in new levies on families, firms
GREECE has unveiled a bill to boost tax revenues under the terms of its international bailout, part of a two-pronged attack to get its citizens and firms to pay their way.
The planned measures are estimated to increase tax revenues by about €2.5 billion in 2013-2014, the finance ministry said.
A second bill to be introduced later will to reform a tax administration widely seen as corrupt and ineffective in combating rampant tax evasion.
The first bill, introduced, late last night, scraps many tax exemptions and raises tax rates on property, companies and households with above-average income. There is also a tax on capital gains for stock sales.
"The proposed legislation is part of wider plans to create a just and effective tax system, reorganise the tax collection mechanism and apply a stricter framework against tax evasion," said the draft legislation.
The bill is part of an overall €13.5bn austerity package for the next two years that Athens passed last month to qualify for further EU/IMF bailout funds.
Wage cuts and tax increases will keep the economy in a sixth consecutive year recession in 2013, bringing total economic contraction in 2008-2013 to 24pc, according to estimates by the country's central bank.
Getting the tax bill through parliament is among the conditions Athens must fulfil to get €14.7bn in rescue loans by the end of March, on top of the €34.3 its lenders cleared yesterday for disbursal.
Athens depends on the bailout funds to avoid a chaotic bankruptcy that might force it to exit the euro and to recapitalise its banks, a key condition for economic recovery.
The tax bill will be a further test for the cohesion of Greece's fragile, three-party ruling coalition under conservative prime minister Antonis Samaras.
The austerity measures it has taken since winning power in a June election have dented its popularity. A Public Issue/Skai poll published on Friday showed the leftist, anti-bailout Syriza party with a 4.5 point lead over Samaras's New Democracy party.
A date for a parliamentary debate on the tax bill has not been set yet. According to a government official, it might be voted after the Christmas holidays.
Under the draft legislation, Greece will raise the tax rate on corporate profits to 26pc from 20pc but lower the tax on distributed dividends to 10pc from 25pc. Capital gains from stock trading on the Athens stock exchange will be subject to a 20pc tax from April next year, while interest income from bank deposits will be taxed by a higher 15pc rate versus 10pc currently.
The bill reduces the current eight tax brackets to three, imposing a 42pc top rate on incomes above €42,000. Currently, a 40pc tax rate applies to those earning over 60,000 while incomes over €100,000 are taxed at 45pc.
Wage earners and pensioners earning up to €25,000 will be taxed at 22pc. Incomes above €25,000 and up to €42,000 will be taxed at 32pc.
Rental income up to €12,000 will be taxed at 10pc. Above this threshold the tax rate will be 33pc.
The tax reform will do away with many tax exemptions, including part of the interest paid on home loans and insurance. But there will be relief for those earning up to €21,000 a year - a €2,100 euro tax credit, phase out on higher earners.