The Treasury is considering complete elimination of tax concessions for those who have an annual family income above 40,000 euro. At the same time, it is foreseen for tax breaks to remain for families with an annual income below 30,000 euro.
This proposal was submitted and discussed by the finance team of the government in an attempt to boost government revenue while at the same time to apply a measure that will have a social character. According to sources, one of the scenarios, considered by the Treasury, for reduction or elimination of tax benefits foresees:
1. No change in the regime of tax benefits for those who have an annual family income of up to 30,000 euro. According to recent data from the General Secretariat for Information Systems regarding the incomes in 2010, from a total of 5,694,978 income-tax returns filed, annual family income of up to 30,000 euro has been declared in 4,772,152.
Concessions and nontaxable amounts from these tax returns have cost the government 4.7 billion euros. If the ministry’s scenario is approved, these tax breaks will not be affected by reductions.
2. For family income between 30,000 euro and 40,000 euro, all concessions are foreseen to be halved (i.e. by 50%). For 2010 incomes, this category includes almost 350,000 tax returns, as the amount of tax concessions reaches 800 million. Therefore, if the 50% cut is applied, the benefit to the Treasury will be about 400 million euros.
3. As far as those with an annual family income of over 40,000 euros are concerned, the discussed scenario foresees elimination of all tax breaks. According to income data in 2010, tax returns of family incomes over 40,000 euro were nearly 550,000 and tax concessions amount to 1.8 billion euro.
In the grips of the crisis
Of course, the economic crisis has reduced income, a fact which means that the number of families with an annual income of up to 30,000 euro is likely to have increased, while that of families with an annual income above 40,000 has decreased. Therefore, it is almost certain that the reduced tax concessions sums will change.
However, according to initial estimates, this proposal for cuts in tax concessions will bring the state about 2 billion annually. In all cases, the new tax bill will make clear what will happen, as the Memorandum foresees adjustments and limitation of tax concessions.
The list of tax concessions
The list of tax concessions is long and therefore the supervisory Troika calls for drastic cuts in them. The concessions include:
- Reductions in the percentage of income taxes for the cost of treatment, medical examinations, rents, school fees, life insurances, contributions, donations, interest on mortgage loans for first home, etc.
- Reductions in the net amount received from agricultural incomes of farmers and stock-breeders.
- Reduced VAT rates valid in the territory of the Aegean islands (with the exception of Crete). On these islands VAT rates are 4.5%, 9% and 16% instead of 6.5%, 13% and 23%.
- Tax concessions for transfer of property, inheritances, donations of real estate and other property, donations from parents. The non-taxable minimum for donations from parents to their children or from one spouse to the other amounts to € 150,000 euro.
Transfer of property
The tax free minimum for transfer of property, donations from parents, inheritances and donations from first home amounts to 200,000 euro if their acquirer is single, and to 250,000 euro if the property acquirer is married, and it increases by 25,000 euro for each first and second child and by 30,000 euro for the third and each subsequent child. There are also tax concessions for the purchase of a car for families with three children, large families and disadvantaged people. There are favourable tax regulations for farmers, organizations, non-profit corporate bodies, etc.
Taxpayers are called on to report to tax services any property they haven’t yet declared, as they will pay a minimum fine. According to sources, the Finance Ministry is considering a special regulation, according to which payers will declare:
1. Undeclared income.
2. Real estate.
3. Deposits in Greece and abroad.
4. Stocks, mutual funds, etc.
7. Gold and jewellery of high value.
8. Works of art of high value.
After declaring their assets and after paying a small fine, they will be given "amnesty". It is specified that the levy which will be imposed will be "attractive", although not yet defined. Moreover, this measure will have to be discussed with the supervisory Troika first before being implemented. With this measure, the Treasury expects to create a new property register, because it will have all the necessary data. The register will enter into force on 1 January 2013, and the Treasury wants to know what movable or immovable property all taxpayers have in Greece and abroad. The electronic register will include deposits, and all taxpayers will be encouraged together with their tax return to fill out a special form, in which all their assets will be described.
In any case, the legislative act which is being prepared for the tax "amnesty" will not include cases of income legalization from criminal activity and will not apply to politicians.