Factbox: Greece set for wage, tax reform to cut deficit

Greece's Finance Minister George Papaconstantinou leaves a news conference in Athens February 9, 2010.

(Reuters) - Greece is putting the final touches to the tax reform bill and public sector incomes policy it plans to unveil later this week, part of its drive to increase state revenues and reduce its deficit. The measures are part of Greece's EU-endorsed plan to return to fiscal health.

The following are some of the key changes in the tax reform bill based on press reports and official comments so far:

TAX BILL

- Many press reports say the upper tax rate of 40 percent will be applied on annual incomes above 60,000 euros, instead of the present 75,000 euro threshold.

- The current 12,000 euro tax exemption on all incomes will be kept but wage earners and pensioners will need to submit receipts for goods purchased or services paid for to qualify for the exemption. Receipts will help the tax service do crosschecks and capture tax dodgers.

- Press reports say incomes between 12,000 and 15,000 euros are expected to be taxed at 15 percent, down from the current 24 percent tax on incomes from 12,000 to 18,000 euros. This is intended to help low earners.

- Incomes from 15,000 to 30,000 euros are to be taxed at 24 percent, a new tax bracket. The finance minister has said about 95 percent of individual tax filings report incomes below 30,000 euros.

- Incomes from 30,000 to 60,000 euros are expected to be taxed at 35 percent. This tax rate currently applies on incomes above 45,000 euros.

- The flat tax rate on certain professional groups (ranging from 5 to 20 percent) will be abolished.

- Dividends will be added to incomes and taxed at the applicable rates, meaning up to 40 percent. Currently, dividend distributions are taxed at a flat 10 percent rate.

- There will a 10-15 percent rise in the special fuel tax.

- Higher taxation is expected on offshore firms.

- A value-added tax (VAT) will be applied on lotteries, sports betting games and services provided by doctors, lawyers, notaries and other professional groups.

- The bill will provide for heavy penalties on tax dodgers and pertinent lists will be made public.

- The bill will replace the current real estate annual fee with a progressive tax on large real estate holdings valued above 300,000-350,000 euros for single taxpayers and above 400,000 euros for couples.

WAGE POLICY

- Greek public sector workers will face a wage freeze across the board this year, extended from a freeze on those making over 2,000 euros a month. Seniority pay rises will apply normally.

- The government announced a 10 percent cut in supplemental allowances, which are added to basic salaries to boost incomes over the years.

- State sector pensioners will get a rise of 1.5 percent above inflation.

- The government estimates that a combination of salary and tax policies will reduce its wage bill by about 4 percent this year.

- The private sector holds separate negotiations with employers, but the state sector policy is often used as a guide for collective wage agreements.

(Reporting by Angeliki Koutantou and George Georgiopoulos, editing by Tim Pearce)