ATHENS, March 16 (Reuters) - Greece put the finishing touches on Tuesday to a tax bill it will submit to parliament next week to try to boost state revenues and shrink its bloated budget deficit.
The measures are part of Greece's EU-endorsed plan to return to fiscal health. [ID:nLDE62D08S]
The following are the key changes in the draft bill that also seeks to capture tax evasion.
(* denotes new additions to draft bill)
- A new upper tax rate of 45 percent applying to annual incomes above 100,000 euros was added to the changes announced in February this year. The previous top tax rate of 40 percent will now apply on incomes from above 60,000 euros ($82,250) to 100,000, instead of the existing 75,000 euro threshold.
Income Tax rate (%)
0 - 12,000 0
12,001 - 16,000 18
16,001 - 22,000 24
22,001 - 26,000 26
26,001 - 32,000 32
32,001 - 40,000 36
40,001 - 60,000 38
60,001 - 100,000 40
Above 100,00 * 45
- The new tax scale shifts the tax burden to higher incomes
- The current 12,000 euro income tax exemption will be kept, but workers and pensioners will need to submit receipts for goods or services to qualify. Receipts will help the tax service do crosschecks and capture tax dodgers.
- Incomes between 12,000 and 16,000 euros are to be taxed at 18 percent, compared to the current 24 percent rate on incomes from 12,000 to 30,000 euros. This is intended to help low-income earners.
- Finance Minister George Papaconstantinou has said about 95 percent of individual tax filings are below 30,000 euros.
- The flat tax rate on certain professional groups and public sector allowances, which ranges from 5 to 20 percent, will be abolished.
- The 10 percent tax on interest earned on bank deposits and government bonds, which is withheld at source, will be maintained. *
- Dividends will be added to incomes and taxed at the applicable rates, meaning up to 45 percent. Currently, dividend distributions are taxed at a flat 10 percent rate.
- Short-term capital gains from stock trading, net of losses, will be added to incomes and taxed at the applicable rate.
- Undeclared deposits in bank accounts outside Greece can be repatriated at a 5 percent tax rate for six months after the bill takes effect. They will not be subject to checks on the sources of this income.
- Introduction of a new progressive tax on large real estate holdings valued above 400,000 euros.
Property value Tax rate (%)
Up to 400,000 0
400,001 - 500,000 0.1
500,001 - 600,000 0.3
600,001 - 700,000 0.6
700,001 - 800,000 0.9
800,001 - 5 mln 1
Above 5,000,000 2
- Annual tax on real estate held by offshore firms will rise to 15 percent from the current 3 percent. *
- Church income from real estate holdings will be taxed at 20 percent. Property bequests at 5 percent and cash bequests at 10 percent. *
- The bill will provide for heavy penalties for tax evaders, ranging from fines to closure of shops and seizure of assets. Business transactions with a value exceeding 1,500 euros will have to be done through checks or credit cards, not cash.
- Value-added tax (21 percent) will be applied to a wider category of transactions. (For details, see note below)
- Gradual reduction of non-distributed corporate profit tax to 20 percent, from current 25 percent, with a 24 percent rate applying in 2010.
- Pay bonuses at banks and financial firms will be taxed at 90 percent.
- Tax amnesty for individuals and businesses that assist in exposing corruption in public sector. Rewards for information leading to the arrest of those involved in bribery or tax evasion. *
NOTE ON VAT: Increases in VAT rates from 4.5, 9 and 19 percent to 5, 10 and 21 percent respectively have been already enacted on March 5 as part of a package of additional austerity measures. The expected fiscal impact on the revenue side is 0.54 percent of GDP or 1.3 billion euros.
The package also included increases in excise taxes in addition to those voted in parliament in January with an expected fiscal impact of 0.46 percent of GDP or 1.1 billion euros:
- Rise in petrol excise tax by 0.08 euro and diesel by 0.03 euro
- Rise in excise tax on cigarettes from 63 to 65 percent and alcohol tax by 20 percent.
- Launch of excise tax on electricity (2.5 euros/MWh for industrial consumers and 5 euro/MWh for households)
- Excise taxes on luxury goods (cars, yachts, etc.)
(For a graphic on Greek deficit-cutting plans, clickhere) (Reporting by George Georgiopoulos)
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