Tax hikes to hurt most Greeks
The government’s proposal for tax revenues includes some surprising measures that apparently have the approval of the country’s creditors.
Households and enterprises are set for even tougher years ahead, given that the foreseen changes to value-added tax rates provide for the inclusion of many food commodities and food service in the top bracket of 23 percent, while enterprises will see their income tax rate grow from 26 to 28 and possibly 29 percent, depending on financial conditions.
The solidarity levy is to be increased retroactively from January 1, 2015 for all taxpayers with an annual income of at least 12,000 euros, while the tax rate on income from rent may also rise to fetch another 200 million euros if there is a shortage in state revenues.
On the VAT front, the main changes – to apply from this month – concern the shift of commodities from lower to higher brackets, so that the state reaps extra revenues of 1 percent of GDP per year.
Therefore, the top rate of 23 percent will now include food service, the majority of food products, public transport tickets and taxi fares. The middle rate of 13 percent will apply to hotel accommodation, energy and water supply, all of which used to be in the 6.5 percent bracket, which is now shrinking in terms of included items and in value, as it will drop to 6 percent: It will concern books, drugs and theater tickets.
The special 30 percent discount on VAT rates for the Aegean islands is abolished; it will only be retained until end-2016 for remote islands, in the expectation that a mechanism offsetting the loss for local residents will be in place by then. The new rates on hotel accommodation and the Aegean islands will start applying in October, after the peak tourism season.
The Single Property Tax (ENFIA) will be maintained for this year and next, while farmers will see an end to their special tax status (on diesel and income tax). The heating oil subsidy will be paid to fewer recipients, and incomes from rent will be taxed at a 15 percent rate (from 11 percent today) for up to 12,000 euros per year, and 35 percent against the current 33 percent for higher incomes.