The model for the taxation of personal income is changing fundamentally, as the financial team of the government is preparing to implement a simple system under an American model, which is based on the principle of "revenues minus expenses."
According to sources, the new system provides for the subtraction of all expenses from the total income of each taxpayer, except for those related to the acquisition of property and payment of utilities bills.
The total "net" amount, calculated this way, will be taxed at a tax rate of 25% to 45%. Since, as it becomes clear, the taxable income will be lower after the deducting of expenses, tax rates which now start at 10% on incomes of up to 12,000 euro will increase.
The Ministry of Finance reckons that with the new system, which is expected to be introduced for 2013 incomes, traders and freelancers will declare much higher incomes, since taxpayers will begin again the "hunting" of receipts, to save on taxes.
At the same time, for the better functioning of the system, its implementation will be combined with electronic tracking of the issuance of receipts for retail.
According to the same sources, there will be incentives (e.g. reimbursement) for the use of a card for receipts, credit and debit cards.
Also, all cash registers of the companies for retail sale of goods and services will be connected to the General Secretariat for Information Systems of the Ministry of Finance in order to take into account real-time data from receipts for cash payments.
More specifically, the total amount of expenses of each taxpayer, other than the cost of buying real estate, cars or other property, will be recognized as income not subject to taxation.
Expenditure will be 100% deductible from the total income, from salaries, pensions, rents, agricultural income, etc.
The framework
The new system will take into account all expenses, which based on the existing legal framework are used today to achieve the tax-free threshold of 5,000 euro (expenses for purchases of consumer goods and services, costs for tolls, car insurance and etc.), as well as those which provide tax reduction of 10%, such as rents, medical expenses for medical examinations, school fees, life insurance, costs for renewable energy and more.
Under the new system, to determine the non-taxable threshold, except for the costs for acquisition of property, the costs for paying bills for electricity, water, telephone and tickets will also not be taken into account.
A powerful incentive for requesting receipts
Receipts will again become valuable because taxpayers will be able to save taxes through them. And if there are concerns that by the massive collection of receipts most taxpayers will attain a higher tax-free threshold, the Ministry of Finance responds that on the other hand, all the other traders and freelancers will be forced to issue receipts for all sales of goods or services and will pay in full the respective VAT.
As they explain, under the new system state revenues from income tax will also increase, since there will be a large increase in declared turnover from all vendors and freelancers.
In particular, in order people to be more strongly encouraged to request receipts and all traders to be forced to issue them, the proposal for the implementation of the new system provides for the minimum rate, with which to tax the net amount remaining after the deduction of costs, to amount to 25%.
That is, it will be higher than the highest rate of VAT, which is 23%. Thus, taxpayers will have a powerful incentive to demand receipts, because when issued, they will pay a VAT from 13% to 23%, but they will save at least 25% income tax.
Bonuses using a card for receipts, credit and debit cards
Through the electronic control over the issue of receipts for the sale of goods and services, taxpayers' expenses will be reported in real-time.
"Bonuses" will be received by taxpayers who use a card for receipts, credit or debit cards.
Thus, for example, according to sources, those who choose to use a credit or debit card for their purchases, or to obtain and use a card for receipts, will receive a bonus - or the return of a small portion of the amount for the purchase or a reduction of VAT levied on goods or services purchased.
The plan
At the same time a boost will be given to the plan to connect all cash registers to the General Secretariat for Information Systems, in order to be able to report in real time the sales, which are paid in cash, as well.
It should be noted that banks began to issue "cards for receipts" in early 2012, but consumers ignored them.
The Ministry of Finance found that taxpayers do not obtain those cards because apart from everything else, the "movement" for issuing receipts faded away, and the authorities did not support it with an advertising campaign.
Now with the possibility for the implementation of the new system for taxation of personal income next year, the Ministry is planning to achieve widespread use of cards for receipts and credit and debit cards through bonuses.
The purpose of the ministry is the majority of the costs for consumer goods and services purchases to be done through cards, so that the payments to be reported by POS systems and receipts data to be sent directly or indirectly through banks into the General Secretariat for Information Systems.
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