Negotiations with European creditors to determine time, scope of Greek govt's tax breaks

Monday, 05 August 2019 21:20
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By T. Tsiros

Negotiations with European creditors, as widely expected, over “fiscal space” in the 2020 budget will determine both the substance and timetable for ratifying tax breaks promised by the new Mitsotakis government

The government’s economy leadership appears optimistic over the prospect of “fiscal space” during the ongoing execution of the 2019 budget, despite the median decrease in the property tax (ENFIA) of 22 percent. Nevertheless, the landscape for 2020 is still not clear.

By current calculations, the government’s first batch of tax breaks translates into two billion euros of less revenue for the 2020 budget.

Besides the unpopular property tax, the first tax cuts to be implemented include modest decrease in the corporate tax rate and a 9-percent first tier tax rate for individuals, along with a high-profile bonus for newborn infants – in a bid to combat an acute demographic crisis in the country – along with gradual decreases in the very high social security contributions paid by wage-earners, employers and especially self-employed professionals, traders and craftsmen.

The next year’s budget also carries a “legacy” spending measure implemented by the previous leftist SYRIZA government, namely, a monthly allocation dubbed as the “13th pension”. The latter was abruptly announced and allocated just weeks before the late May European Parliament election, something the opposition at the time vilified as an attempt by the waning Tsipras government to prevent an election defeat.

Besides keeping the tax-free annual income threshold at the current level, ruling center-right New Democracy (ND) party has also promised – before the July 7 election and after forming a majority government – to lower VAT rates on foodstuffs, electricity and the F&B sector.

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