Hefty cuts to tax discount and pensions

10 April 2017
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The taxable income threshold for salary workers, pensioners and farmers looks set to drop to 5,636 euros per annum from 2020, and possibly as early as 2019 if the budget targets are not met. At the same time, just under a million pensioners will see their monthly benefit slashed by some 25 percent. This is the outcome of last Friday’s Eurogroup meeting for Greek people.

The annual tax discount is therefore set to plummet to 1,240 euros from 1,900 euros today, considerably increasing the load on taxpayers with low incomes of between 9,000 and 13,000 euros a year. In this particular income bracket, the tax due will double from what it is today.

It is not yet certain whether the 5,636-euro threshold will concern all taxpayers in the above categories. Today a threshold of 8,636 euros applies to single taxpayers and rises depending on family status up to 9,550 euros.

In case the fiscal figures allow for the application of the so-called countermeasures, the load on taxpayers will lighten a little, but it will remain heavy nonetheless. Even with the offsetting measures, the taxes due will be higher than today.

Plans for the countermeasures include the reduction of the basic 22 percent income tax rate to 20 percent, and taxpayers with annual incomes of up to 20,000 euros will not have to pay any solidarity levy. The threshold for that today stands at 12,000 euros. Another idea concerns the horizontal reduction of the Single Property Tax (ENFIA) by 5 percent as of 2020, but only if the primary budget surplus exceeds 3.5 percent of gross domestic product.

Meanwhile the Labor Ministry is contemplating cuts of 20-25 percent to main pensions, and if necessary to auxiliary pensions too, for at least 900,000 retirees. This is in order to avoid any extreme cuts amounting to 35-40 percent and a freeze in new pension increases.

The final bill will be decided along with the technical experts to arrive in Athens, probably later this month, toward the savings of 1.8 billion euros from pension expenditure agreed in last Friday’s Eurogroup.

A senior government official said that the Greek proposal for a ceiling on cuts has been accepted by the eurozone, while the International Monetary Fund showed some reservations.

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