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Taxes for the Greeks to be raised by 3 billion euro

16 September 2012 / 15:09:27  GRReporter
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The 5,000 euro non-taxable minimum will be sacrificed at the altar of the painful package of measures amounting to 11.5 billion euro. Studies are being made in order for this minimum to be replaced by a reduction, but also by a new tax scale, which hides an additional burden for the low and middle income brackets.

The economic headquarters have managed to fill the "hole" in the package with great efforts, in order to smooth out the differences with the Troika and for the positive report to be given a green light, which will lead to the granting of 31.5 billion euro. Now, the proposal of the International Monetary Fund (IMF), which refers to the non-taxable minimum and the tax scale, is being thrown at the negotiating table. It is believed that the application of these measures can lead to savings of 2.5 to 3 billion euro.

On the other hand, the political leadership of the Ministry of Finance is pushing a plan for a 100% cut of the revenue from taxable costs, proven by invoices, for specific categories of freelancers and service providing companies which, according to the available data, are "champions" in tax evasion.

It should be noted that the taxation of all incomes from one euro upwards has been discussed previously as well. It was part of the tax reforms at the time when Giorgos Alogoskoufis was a minister and proposed this measure to apply only to freelancers and craftsmen, as he believed that this would reduce tax evasion.

At the same time, however, if the removal of the 5,000 euro non-taxable minimum is accepted only for incomes from freelance jobs and for sole traders, then their taxed net income will not be levied on the basis of the tax scale for individuals, plus the income from other sources (property, paid services and others.), but will be subjected to the 20% tax which applies to legal persons. If this plan is accepted, then all people receiving salaries and pensions, with no exceptions, will watch their incomes decrease significantly again, as the monthly tax deductible will increase. This will happen if the IMF scale is adopted, which provides a factor of 18% for incomes of up to 22,000 euro, 35% for incomes from 20,001 to 45,000 euro, 40% for incomes from 45,001 to 100,000 euro and 45% for incomes above 100,000 euro, and if the currently applied scale with the first factor of 10% remains valid.

In particular, when it comes to receipts, if the U.S. model for determining the income is adopted, the most important change will concern the taking out of all costs, even those related to the payment of bills for electricity, water, etc. from the revenues, without, of course, the cost of acquisition of personal property.

Thus, tax authorities will recognize and deduct from the taxable income approximately 100% of all receipts, regardless of whether they are for payment of utilities, freelance services, or purchases of goods and costs for restaurants and bars.

The Finance Ministry is mobilizing its forces to curb tax evasion, which is still flourishing, since the organization of a control mechanism is still only on paper. Therefore, it is planned that the reorganization of the tax mechanism ibe completed by the end of the year, and that the following measures, aiming to achieve direct results, be taken as well:

* In case of non-payment of taxes for amounts over a certain limit per year, tax reconciliation and payment of taxes will not repeal the criminal nature of the non-payment.

* The implementation of the electronic register of movable and immovable property in Greece and abroad for 2013. Besides cash fines, penalties provided by the decree of criminal offence are also foreseen for those who do not declare their assets.

* Special legislation for foreign companies (Controlled Foreign Corporation Legislation-CFC), which will contain evidence of the tracking of the inspected companies, which have been created for tax purposes only, as for example, regarding the actual management of the company, in order for these companies to be disclosed and taxed in Greece.

* Issuance of detailed provisions regarding tax evasion, already available in taxation advanced countries, in order for transactions which have been made solely for the purposes of tax evasion to be cancelled.

* Unification of the mechanism for tax control and its restructuring, in order to enable fast and targeted checks based on a selection from the profiles of the taxed.

* Strengthening of the human factor and modern technological equipment for the tax authorities and a central control coordination, in order for unverified cases to be checked.

* Unification of the legislation for inter-company transactions (transfer pricing) with the provision of exclusive responsibility for supervision from the Ministry of Finance, with qualification of personnel from other ministries and utilization of those who are already qualified.

The opinions of executives from the Ministry of Finance differ with regard to the removal of the non-taxable minimum, as this would lead to unrest in society, as well as in the parties themselves. Therefore, it is proposed that its implementation, which aims to limit tax evasion, should apply only to freelancers and craftsmen, and be included in the package of measures which affect the search for actual incomes.

The removal of the 300 euro minimum is being proposed within the structuring of a strong tax system. Currently, incomes exceeding this amount are subject to income tax. The aim is for taxation to start from the first euro of the revenues. The proposal to increase the rate of retention from 20% to 25% is, however, not accepted.

Tags: tax evasion non-taxable minimum tax scale
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