FACTBOX-Greece’s tax reform to cut deficit

ATHENS, March 16 (BestGrowthStock) – 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

– 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

– 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

– Rise in petrol excise tax by 0.08 euro and diesel by 0.03

– 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, click on

Stock Market Today

(Reporting by George Georgiopoulos)

FACTBOX-Greece’s tax reform to cut deficit