Greece Announces Revenue-Raising Tax Package

by Lorys Charalambous, Tax-News.com, Cyprus

28 August 2008

The Greek government has announced a raft of new revenue-raising measures as part of a deficit reduction package, although it signalled that the corporate and individual income tax rates would fall by 5% over five years.

In a statement given on Wednesday, Greek Finance Minister George Alogoskoufis blamed a slow down in the economy brought on by world economic events, and widespread tax evasion for a fall in tax revenues, which must be reversed in order for Greece to meet its budgetary targets.

The fiscal plan, which will be presented to parliament on Thursday, calls for a new 10% tax to be imposed on capital gains made from selling shares, and a new 10% tax on stock dividends, both applicable from January 1, 2009. The existing 0.15% share transaction tax will be gradually phased out from next year.

Another measure will require companies to pay 85% of their estimated tax payments before the end of the fiscal year, up from the current 65%.

In a bid to tackle tax evasion by the self-employed, these taxpayers will now have to pay tax at 10% on their first EUR10,500 in annual earnings. Previously, the self-employed were exempt from tax on the income earned under this threshold, but the government has noted a sharp rise in the number of professionals and tradesman declaring total earnings just below the EUR10,500 mark. There will also be incentives for people to clear tax debts by making it easier to pay off back taxes.

Under another revenue-raising measure, tax on car licences will increase by 20% this year.

Over the longer term however, Alogoskoufis said that he wanted to see a fall in the overall tax burden, and he announced the rate of corporate and the middle band of individual income tax, both 25% at present, will be reduced to 20% by 2014, starting with a 1% cut in 2009.

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